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I still think this FTSE 250 growth stock could be a great long-term buy

Shares in investment platform provider and FTSE 250 member AJ Bell (LSE: AJB) have been on great form since the company joined the market back in December.

Those buying a slice of the pie back then would have been sitting on a near-100% gain at yesterday’s closing price. Considering the abject failure of some recent IPOs — luxury car maker Aston Martin springs to mind — that’s a superb result over such a short time.

Today’s trading update for the three months to the end of June will likely generate even more interest in the stock.

Total assets under administration rose 6% to £50.7bn over the period and 13% in the last 12 months, easily outperforming the FTSE All-Share index. The total number of customers served by AJ Bell also increased 5% in the quarter to 224,644, with 94% using the company’s platform. 

For the long term

Given the tone of today’s statement, it’s not surprising that the shares have responded positively — climbing almost 5% in value as I type. Unfortunately, this makes the company’s valuation even less palatable than it was before. 

Before markets opened this morning, AJ Bell’s stock was trading at an eye-watering 58 times forecast earnings. Considering the recent volatility in popular stocks previously trading on similar valuations (ASOS, Fevertree), it’s understandable if many are put off building a position at the current time.

Pricey as the shares undoubtedly are, it’s hard to disagree with CEO Andy Bell’s belief that “people will need to save more via their pensions and ISA for the long term” when it’s considered that life expectancy is likely to continue rising and retirees are becoming increasingly active in their golden years. This is why I’d be far more willing to pay up for a company operating in this area over, say, an online retailer whose customers will switch to a rival in the blink of an eye.

With peer Hargreaves Lansdown boasting a market-cap of £10bn, there’s arguably plenty of room left for AJ Bell (£1.8bn) to grow. 

“A good start”

Another company I think has great long-term prospects is identity data specialist GB Group (LSE: GBG).

Like AJ Bell, shares have been in great form recently, rising by a third since the beginning of 2019 on account of the company trading above market expectations. Like AJ Bell, GB also provided an update on trading this morning. 

The £1.1bn-cap reflected that it had made “a good start” to its new financial year with revenue and profit in keeping with management predictions. In addition to securing a number of new clients over the period (including struggling bookie William Hill) GB also announced it had managed to pay down £10m of debt and make “good progress” with integrating its recent acquisitions (IDology and VIX Vertify).

GB’s shares traded at 34 times earnings before markets opened. While not as highly-valued as AJ Bell, that’s still very expensive. As you might expect from such a stock, there’s very little in the way of dividends (0.6% yield).

However, considering the huge opportunity available to GB as more organisations require support to help tackle fraud and comply with regulations, I’m not surprised by the recent interest from investors.

Those with many years in the stock market ahead of them will surely do well if management is able to continue successfully executing its growth strategy. 

A Growth Gem

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Paul Summers owns shares in AJ Bell. The Motley Fool UK has recommended Hargreaves Lansdown. 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.