Hargreaves Lansdown shares look too low to me

Hargreaves Lansdown shares have lost a third of their value in the past 12 months. They’ve also halved over the last five years. Time for me to buy big?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

pensive bearded business man sitting on chair looking out of the window

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Hargreaves Lansdown (LSE: HL) shares had a roller coaster ride last week. On Wednesday morning, the share price shot up after the online broker released its latest half-year results. But then the stock slumped just as sharply, swinging more than 15% in a single day.

Four-year slump

Long before Covid-19 crashed financial markets, Hargreaves Lansdown shares closed at 2,419p on 17 May 2019. At the time, I recall thinking that they were overvalued and surely set to slide.

Sure enough, the stock came crashing back to earth with a bang. Here are the closing prices for the past three years:

End-20201,525p
End-20211,355p
End-2022856.2p

For the record, the Hargreaves Lansdown share price has never got close to its spring 2019 peak. Indeed, at its 2022 low, it crashed to just 735.6p on 24 October. On Friday, this FTSE 100 share closed at 853.6p, up 16% from last year’s bottom. This values the group’s equity at £4.1bn.

Even during the stock market boom of 2020-21, Hargreaves Lansdown shares had a volatile time. And with financial markets crashing last year, this stock had a brutal 2022.

Indeed, it hasn’t been good to its owners over the past year, losing 33.7% of its value. Over five years, Hargreaves Lansdown shares have crashed by almost exactly half. Ouch.

Good health

Then again, when I buy a share today, I’m buy a stake in a company’s future performance, rather than its past. And with the firm’s share price laid low, I’ve added this sagging stock to my watchlist of potential buys.

Obviously, the investing services offered by Hargreaves and other fund supermarkets are set to play a major part in the financial future of millions of Britons. Also, the firm’s yearly revenues leapt by a fifth to £350m in 2022, while pre-tax profits soared by 31% to £198m.

In short, the company — founded in 1981 — appears to be in decent health. But what about its share fundamentals?

This stock was overpriced. What about now?

The shares trade on a price-to-earnings ratio of 16.1, for an earnings yield of 6.2%. That’s a bit more expensive than the wider FTSE 100. Also, its dividend yield of 4.7% a year is a full percentage point higher than the Footsie’s cash yield. But this is covered only 1.3 times by earnings, which isn’t a wide margin of safety.

What’s more, the company is engaged in a very public spat with its co-founder and largest shareholder, billionaire Peter Hargreaves. He argues that the group should aggressively cut costs and lay off workers. That can hardly be very motivating for the company’s workforce.

Summing up, my view is that Hargreaves Lansdown shares look cheap today in historical terms. In addition, I like the look of their market-beating dividend. But I won’t buy this stock just yet, because I can see better bargains lurking in the FTSE 100 at the moment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D'Arcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could Premier African Minerals be a millionaire-maker penny stock?

Shares of Premier African Minerals (LSE:PREM) have crashed over the past year. Is this a golden opportunity for me to…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Which FTSE defence stock should I buy? Here’s what the charts say

FTSE shares like BAE Systems have been flying higher over the last couple of years as the geopolitical situation has…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Here’s why investors should consider buying Scottish Mortgage shares today

After a steady rise in recent times, this Fool thinks Scottish Mortgage shares could be worth considering. Here he explains…

Read more »

Young black man looking at phone while on the London Overground
Growth Shares

This FTSE 250 stock keeps blowing broker forecasts out of the water

Jon Smith considers the ever-increasing share price targets for a FTSE 250 stock that has risen by 120% in the…

Read more »

A mixed ethnicity couple shopping for food in a supermarket
Investing Articles

Marks and Spencer shares could rise 29%, according to this broker

Marks and Spencer shares currently sport a P/E ratio of just 10, and one well-known City broker believes the company…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 of the best FTSE 100 beginner stocks to consider buying

The Footsie offers people just beginning their investment journey some of the best stocks to buy. Here are two to…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Here’s why the Aviva share price suddenly dived

The Aviva share price suddenly dropped by over 6% the other day. But there's a simple explanation for this sudden…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

With no savings, I’d listen to Warren Buffett to aim for long-term wealth

Warren Buffett looks for "1-foot bars" to step over, not "7-foot bars" to jump. Stephen Wright looks at what this…

Read more »