Is Hargreaves Lansdown a solid growth stock? - The numbers tells it is
10 Sep 2014 • About Hargreaves Lansdown (
$HL.) • By InTwits
Hargreaves Lansdown is a fast-growing stock in Financial Services industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Hargreaves Lansdown showed fast growth in the last financial year. The company's revenue surged on 22.6% in FY2014. In addition to revenue Hargreaves Lansdown also keeps delivering EBITDA growth. It was 8.42% in FY2014
In the longer period the company showed fast revenue growth of 19.9% from FY2011 to FY2014 annually. EBITDA surged on 18.4% from FY2011 to FY2014 annually.
Hargreaves Lansdown ($HL.) financials for the last 5 years
| mln. £ | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Revenue | 159 | 208 | 239 | 292 | 358 |
|---|
| Revenue growth, % | | 30.8% | 14.8% | 22.5% | 22.6% |
|---|
| SG&A, % | 46.3% | 40.1% | 34.9% | 34.4% | 3.14% |
|---|
| EBITDA | 88 | 127 | 153 | 194 | 211 |
|---|
| EBITDA growth, % | | 44.4% | 20.7% | 26.9% | 8.4% |
|---|
| EBITDA margin, % | 55.2% | 61.0% | 64.1% | 66.4% | 58.7% |
|---|
| Net Income | 61 | 92 | 113 | 148 | 162 |
|---|
| Net Income margin, % | 38.5% | 44.2% | 47.3% | 50.7% | 45.2% |
|---|
| |
| CAPEX | 8 | 2 | 1 | 5 | 5 |
|---|
| CAPEX/Revenue, % | 4.93% | 0.768% | 0.418% | 1.81% | 1.40% |
|---|
| Debt | 0 | 0 | 0 | 0 | 0 |
|---|
| Cash | 71 | 122 | 158 | 198 | 201 |
|---|
| Net Debt/EBITDA | -0.8x | -1.0x | -1.0x | -1.0x | -1.0x |
|---|
| |
| ROIC, % | 117.0% | 133.9% | 108.7% | 111.7% | 101.0% |
|---|
| ROE, % | 81.2% | 93.3% | 78.5% | 83.9% | 76.4% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. In the longer period Hargreaves Lansdown's EBITDA margin decreased slightly on 2.30 pp from 61% in FY2011 to 58.7% in FY2014.
Hargreaves Lansdown shows attractive ROIC at 101% for the last 12 months which assumes stable development model. During the last three years it dropped - it was 134% in FY2011. For the last three years the average ROIC was 107%.
The company's Net Income margin dropped on 5.50 pp from 50.7% to 45.2% in FY2014. If we look for the longer period Net Income margin increased slightly on 1 pp from 44.2% in FY2011 to 45.2% in FY2014.
Hargreaves Lansdown operates at ROE of 76.4%. It's average level of ROE for the last three years was 79.6%.
Capital expenditures (CAPEX)
Hargreaves Lansdown's CAPEX/Revenue was 1.40% in FY2014. The company's CAPEX/Revenue surged on 0.632 pp from 0.768% in FY2011 to 1.40% in FY2014. It's average CAPEX/Revenue for the last three years was 1.21%.
Leverage (Debt)
Having such a fast growth profile the company keeps negative net debt at -1.0x Net Debt/EBITDA. In the last 3 years Hargreaves Lansdown showed fast leverage growth of 0.01x from -0.96x in FY2011 to -0.96x in FY2014.
Valuation vs. comparable companies
At the end of trading day today Hargreaves Lansdown traded at 0.5x P/E which is 97.3% lower than 18.3x Financial Services peer group avearge calculated on the basis of 13 companies.
Peers in Financial Services
Below we provide Hargreaves Lansdown benchmarking against other companies in Financial Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| First Property Group ($FPO) | | 10.0% | 31.4% | 13.9% | 69.7% |
| S & U ($46IE) | | | | 5.9% | 10.6% |
| Leeds Group ($LDSG) | | | | 9.8% | 9.9% |
| Record ($REC) | | -15.6% | -27.2% | -9.7% | 7.4% |
| Canaccord Genuity Group Inc ($CF.) | | 39.1% | -24.7% | 31.8% | 7.3% |
| |
|---|
| Median (9 companies) | | 3.1% | -4.7% | 5.9% | 7.3% |
|---|
| Hargreaves Lansdown ($HL.) | | 30.8% | 14.8% | 22.5% | 22.6% |
Top companies by Gross margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Record ($REC) | | 99.6% | 98.8% | 98.8% | 99.6% |
| Walker Crips Group ($WCW) | 75.5% | 74.5% | 71.8% | 58.0% | 68.2% |
| First Property Group ($FPO) | 79.4% | 85.2% | 86.0% | 69.5% | 67.9% |
| S & U ($46IE) | | | 65.6% | 66.5% | 67.6% |
| Private & Commercial Finance Group ($PCF) | 31.0% | 28.9% | 28.9% | 29.3% | 29.4% |
| |
|---|
| Median (7 companies) | 31.0% | 79.9% | 65.6% | 58.0% | 67.6% |
|---|
Top companies by EBITDA margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Real Estate Credit Investments Pcc ($RECP) | | | 58.6% | 89.3% | 77.0% |
| First Property Group ($FPO) | 39.9% | 45.5% | 44.8% | 37.6% | 40.2% |
| Record ($REC) | 50.4% | 44.4% | 34.5% | 33.7% | 34.6% |
| S & U ($46IE) | | | 25.5% | 27.9% | 30.6% |
| Private & Commercial Finance Group ($PCF) | 11.5% | 10.9% | 11.7% | 12.5% | 13.7% |
| |
|---|
| Median (7 companies) | 11.4% | 27.7% | 18.6% | 20.2% | 30.6% |
|---|
| Hargreaves Lansdown ($HL.) | 55.2% | 61.0% | 64.1% | 66.4% | 58.7% |
Top companies by CAPEX/Revenue, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Fulcrum Utility Services Ld ($FCRM) | 3.1% | | 5.4% | 5.0% | 3.7% |
| Walker Crips Group ($WCW) | 0.5% | 1.1% | 1.0% | 2.4% | 2.6% |
| Canaccord Genuity Group Inc ($CF.) | 0.3% | 1.0% | 1.8% | 0.9% | 1.8% |
| S & U ($46IE) | | | 1.4% | 1.4% | 1.3% |
| Leeds Group ($LDSG) | 0.8% | | 0.4% | 0.7% | 0.6% |
| |
|---|
| Median (8 companies) | 0.3% | 1.0% | 0.7% | 0.8% | 1.0% |
|---|
| Hargreaves Lansdown ($HL.) | 4.9% | 0.8% | 0.4% | 1.8% | 1.4% |
Top companies by ROIC, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Record ($REC) | 63.1% | 44.4% | 23.8% | 19.6% | 20.2% |
| S & U ($46IE) | | | 17.6% | 19.1% | 19.7% |
| First Property Group ($FPO) | 11.7% | 10.3% | 10.0% | 9.2% | 12.2% |
| Leeds Group ($LDSG) | 4.3% | 0.0% | 5.5% | 9.1% | 10.6% |
| Private & Commercial Finance Group ($PCF) | 5.4% | 5.5% | 6.2% | 6.0% | 6.6% |
| |
|---|
| Median (9 companies) | 8.9% | 10.9% | 6.2% | 7.5% | 10.6% |
|---|
| Hargreaves Lansdown ($HL.) | 117.0% | 133.9% | 108.7% | 111.7% | 101.0% |
Top companies by Net Debt / EBITDA
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Private & Commercial Finance Group ($PCF) | 16.8x | 16.0x | 12.8x | 14.3x | 13.9x |
| First Property Group ($FPO) | -1.2x | 5.6x | 3.6x | 3.0x | 5.6x |
| S & U ($46IE) | | | 1.4x | 1.3x | 1.7x |
| Leeds Group ($LDSG) | 4.2x | | 1.1x | 0.2x | -0.5x |
| Record ($REC) | -1.3x | -2.0x | -3.5x | -4.6x | -1.7x |
| |
|---|
| Median (7 companies) | -0.6x | 1.8x | 1.1x | 0.2x | -0.5x |
|---|
| Hargreaves Lansdown ($HL.) | -0.8x | -1.0x | -1.0x | -1.0x | -1.0x |
