AJ Bell (LON:AJB) shares are up nearly 30% over the last six months as the direct-to-consumer or D2C investment market is growing but so is the number of competitors, all of whom are keen to grab market share. So is it worth investing in AJ Bell, as well as investing with AJ Bell?
Is AJ Bell (LON:AJB) a good investment for the long term?
The direct-to-consumer investment market is growing, and AJ Bell is the UK’s number-two provider. The company and the sector benefitted from covid lockdowns as people had time on their hands and many of them used that free time to get more involved with the management of their investments and savings.
AJ Bells’ results showed that the company is still growing with net inflows of £3.80 billion of new money and year-over-year growth in customer numbers of +15.0%. Revenues and margins came in ahead of estimates which meant that earnings per share or eps grew by +6.40%.
Margins at AJ Bell should also benefit from rising interest rates, though how much, will depend on how high UK interest rates rise and what portion of those higher rates AJ Bell shares with its customers who hold cash on deposit
Trying to time to time an investment is never easy AJ Bell shares are down by just over -3.00% in the last year and by -14.0% in the last two years. However, over the short term, the stock price has been picking up, rallying by more than +30.0% in the last three months for example.
Following the release of the full-year results, the good news is now out in the open and the stock has started to drift lower. Weakness in the share price may provide an entry point for investors if for example, the stock trades back to its one-month low of around 320p.
However, I think there are a few questions to ask before considering a purchase
Will AJ Bell’s customer numbers continue to grow?
Will the firm be able to maintain its profit margins in a highly competitive marketplace?
What effect will recent changes to capital gains and the tax treatment of dividends in the UK, have on the company’s earnings?
The stock has enjoyed a good run in the second half of 2022 but the stock price is well below the all-time high of 487p posted in January 2021. And as we have already noted the company is growing both the top and bottom lines attracting new cash and new customers and earning more from them.
The shares currently trade on a PE ratio of 31 times earnings, that’s not exactly cheap, however, that number is forecast to fall to less than 23 times earnings in 2024.
During that time profits before tax at AJ Bell are expected to grow to £101.90 million up from 2021’s £58.40 million.
So the stock is priced for growth within a marketplace that’s estimated to be worth a total of £3.0 trillion.
But unlike many growth stocks, AJ Bell does pay a dividend and has a yield of 2.10% which is expected to expand to 3.90% in the next two years. In the same period earnings per share at the firm are expected to grow to 18.50p from the current 11.40p.
Recent tax changes in the UK could encourage more investors and savers to consider tax-efficient wrappers, such as ISAs, for their nest eggs.
There is an old stock market adage that says it’s often better to travel than arrive, which means that stocks often perform at their best in anticipation of good news rather than on its release. And that looks to be the case with AJ Bell which published results on the 1st of December. The next scheduled announcement for the company will be its Q1 trading update due on the 19th of January.
Analyst consensus for the AJ Bell share price was 327.50p and the average recommendation was a hold. However, broker Liberum has issued a buy recommendation on the stock and raised its price target to 430p from 370p, whilst rival broker Shore Capital maintains its hold rating but with a 390p price target.
The current AJ Bell (LON:AJB) share price is 323.6p which is a change of 4.4 or 1.38% from the last closing price of 323.6 with 66,515 shares traded giving AJ Bell a market capitalisation of £1,334,757,541. The most recent daily high has been 324.07 and daily low 316.8. The AJ Bell share price 52 week high has been 404.07 and the 52 week low 243.8. Based on the most recent AJ Bell share price opening of 323.6, the current AJ Bell EPS (earnings per share) are 0.14 and the PE (price earnings ratio) is 22.72.
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To buy shares in AJ Bell (LON:AJB), you need a trading or share dealing account. Follow these three steps if you want to buy shares in AJ Bell:
- Decide if you want to buy AJ Bell shares in the short-term or invest in the long-term
- Compare share dealing and trading fees in our comparison tables
- Choose which broker is right for you and open an account
Buying one LON:AJB share costs 323.6p. However, as well as the 323.6p cost of buying the shares you will also have to pay stamp duty, commission when you buy and sell shares and custody fees for holding your shares on your account. You also have to consider the difference between the bid price (the price at which you sell shares) and the offer price (the price at which you buy shares). These fees vary depending on what sort of account you open, and with what broker. You can compare the different costs associated with the different types of trading and investing accounts in our comparison tables below.
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