LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.
So right now, I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.
Today I am looking at Hargreaves Lansdown (HL -2.18%) to determine whether you should consider buying the shares at 877 pence.
I am assessing each company on several ratios:
Price/Earnings (P/E): Does the share look good value when compared against its competitors?
Price earnings growth (PEG): Does the share look like a good value factoring in predicted growth?
Yield: Does the share provide a solid income for investors?
Dividend cover: Is the dividend sustainable?
Let's look at the numbers:
| Stock | Price | 3-Yr. EPS Growth | Projected P/E | PEG | Yield | 3-Yr. Dividend Growth | Dividend Cover |
|---|---|---|---|---|---|---|---|
| Hargreaves Lansdown | 877p | 80% | 28.5 | 1.2 | 2% | 84% | 1.5 |
The consensus analyst estimate for next year's earnings per share is 30.7 pence (23% growth) and dividend per share is 25.8 pence (64% growth).
Trading on a projected P/E of 27.9, Hargreaves Lansdown appears more expensive than its peers in the general financial sector, which are currently trading on an average P/E of around 21.8.
Hargreaves Lansdown's P/E and double-digit growth rate give a PEG ratio of around 1.2, which implies the share is fairly valued for the near-term earnings growth the firm is expected to produce.
At 2%, Hargreaves Lansdown's dividend income is below the sector average of 3.8%. However, the firm has a three-year compounded dividend growth rate of 84%, implying the yield could soon catch up to that of its peers.
That said, the dividend is only one-and-a-half times covered by earnings, not really giving Hargreaves Lansdown much room for further payout growth.
So is now the time to buy Hargreaves Lansdown?
Hargreaves Lansdown runs the U.K.'s largest retail "investment supermarket," and the company has really reaped the benefits from the positive trends in financial markets over the past year. Indeed, Hargreaves Lansdown recently reported that, for the first half of its financial year, the company's assets under administration had grown by an astounding 30%.
In addition, the company reported that its profits for the same period had grown a similar 31%.
Furthermore, the company's management expects that the second half of the year will be stronger, as customers seek to take advantage of ISA and pension products before the new tax year begins. The firm has already stated that ISA applications have increased 38% on the previous year.
However, Hargreaves Lansdown's recent performance has impressed investors so much, that over the past year, the firm's share price has nearly doubled, significantly outpacing the wider market.
This rapid rise in the share price leads me to believe that the company currently looks overvalued. Additionally, Hargreaves Lansdown looks expensive when compared to its peers in the general financial sector. So overall, I believe now does not look to be a good time to buy Hargreaves Lansdown at 877 pence.
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In the meantime, please stay tuned for my next verdict on a FTSE 100 share.
