Hargreaves Lansdown shares look too low to me

Hargreaves Lansdowne (LSE: HL) shares have had a roller coaster ride this past week. On Wednesday morning, share prices rose after the online broker released its latest half-year results. But then the stock slumped as sharply, swinging more than 15% in one day.

A four-year slump

Before Covid-19 hit the financial markets, Hargreaves Lansdown shares closed at 2,419p on 17 May 2019. At the time, I remember thinking they were overvalued and surely set for a slide.

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

The history of the share price of Hargreaves Lansdown in US Dollar from 2014 to 2020 is available on this page. Indeed, in 2022 it was the lowest, only 735.6p on 24 October. This is Friday FTSE 100 The stock closed at 853.6p, up 16% from last year’s low. This values ​​the group’s equity at £4.1bn.

Even during the stock market boom of 2020-21, Hargreaves Lansdown shares had a volatile period. And with financial markets collapsing last year, this stock is in for a brutal 2022.

Indeed, it has not been good for the owners over the past year, losing 33.7% of its value. Over five years, Hargreaves Lansdown shares fell by almost half. Ouch.

healthy and happy

Then again, when I buy shares now, I buy shares in the future performance of the company, rather than the past. And with the company’s stock price on the decline, I’ve added this slacker stock to my watch list of potential buys.

Obviously, the investment services offered by Hargreaves and other fund supermarkets will play a major role in the financial future of millions of Britons. In addition, the company’s annual revenue will increase fivefold to £350 million by 2022, while pre-tax profit will increase by 31% to £198 million.

In short, the company – founded in 1981 – appears to be in decent health. But what about the basis of the merger?

This stock is overpriced. Now what?

The stock trades at a price-to-earnings ratio of 16.1, for a yield of 6.2%. That’s more expensive than the wider FTSE 100. Also, the dividend yield of 4.7% per annum is a percentage point higher than Footsie’s cash yield. But this is guaranteed only 1.3 times by earnings, which is not a wide margin of safety.

What’s more, the company is involved in a public dispute with its founder and largest shareholder, billionaire Peter Hargreaves. He said the group had to aggressively cut costs and lay off workers. That can hardly be very motivating for the company’s workforce.

In summary, my view is that Hargreaves Lansdown shares look cheap today in terms of history. Plus, I love the market-beating view of dividends. But I wouldn’t buy this stock, as I can see better deals in the FTSE 100 right now.