In falling nearly 6 per cent yesterday, Harsgreaves Lansdown joined last year’s other big financial services flotation - Moneysupermarket.com - in trading below its issue price.
The question prompted by today’s maiden interims from the FTSE 250 private client investment manager is whether that discount is deserved.
There was nothing in the headline numbers to disappoint. First-half underlying operating profits and earnings per share were up 58 per cent and 75 per cent respectively, firmly in line with forecasts.
But looking backwards is of little use at a time when the FTSE all share index has fallen more than 11 per cent since the start of the year. On that front, the company’s outlook statement is commendably terse: current market conditions are “not ideal”, it says.
That is unsettling given that the first six months of the year - especially February, March and April, the run-up to and first few weeks of the new tax year - are its busiest. On that front, 2008’s ISA season cannot help but be worse than 2007.
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Hargreaves Lansdown benefits from the best brand in the business, an annual administration charge that gives it strong recurring revenues and low levels of redemptions - helped by its strong presence in SIPPs. But with the growth in assets under management countered by falling stockmarkets, and new money likely to be harder to come by, this year’s forecast of 40 per cent growth in earnings may prove demanding
That means that, while Hargreaves Lansdown should trade at a premium to its peers, its current 16 times forward earnings multiple looks vulnerable at a time when sentiment is poor. There will be better times to buy.