Thursday newspaper share tips: Contrasting views on Hargreaves Lansdown

In its interim report for the six months to 31 December, the financial services provider on Wednesday reported revenue had increased from £144.1m to £158.8m.

That was boosted by a 23% increase in net new business inflows of £2.77bn, up from £2.25bn, as well as a 47,000 increase to its active client numbers of 783,000.

Total assets under administration rose 7% to £58.8bn in the six months. The FTSE 100 company said profit before tax rose 6% to £108.1m, and declared an interim dividend of 7.8p per share.

It also flagged the outlook for the second half of the year is generally stronger for new business, especially as it includes the end of the tax year, which acts as an incentive for clients to use tax allowances.

But the company did warn that levels of new business will be partly dependent on investor sentiment and levels of stock markets.

The company's results fell just short of expectations, with revenue expected to be £161.2m and profit expected to be at £110.9m, sending shares falling.

The Times’ Tempus said the market can be “awfully unforgiving” when a company trading on an earnings multiple of 35 misses expectations.

“On earnings, analysts seem to have underestimated the damage done by a difficult stock market, as well as how much is being invested in the company’s next big project, HL Savings.”

It also highlighted the company gets hit twice when markets fall, as investors lose interest in investing and performance-related fees fall.

Tempus warned that with the FTSE 100 already falling 3.1% in January, another hit is on the way.

“On any other measure, the figures are good enough,” it said. “Hargreaves has emerged from a couple of headwinds, an earlier fall in the interest made on clients’ money on account and a reduction in fees from the Retail Distribution Review.”

With long term-trends in the company’s favour, Tempus rated the shares at ‘buy long term’.

In The Telegraph, Questor had a different point of view, rating the shares at ‘avoid’.

It believed increasing competition was eating into profits, which leaves the shares too highly rated.

While it said the financial services firm is now showing “an impressive level of growth” after the slowdown two years ago, it is having to fight harder for growth.

“The market for low-cost investment advisors is getting more competitive, and spending on advertising and marketing is rising,” Questor said.

“Changes to regulations are also reducing so-called trail commissions, which advisors earn for putting clients into investment funds.”