The HUB24 Ltd (ASX: HUB) has had a strong run in recent months. Shares in the wealth management company have rocketed 98.9% higher to $18.50 per share.
That’s good news for investors, but others may be wondering it can repeat the trick again.
Can the HUB24 share price double again by December?
HUB24 now has a market capitalisation over $1 billion but a price to earnings (P/E) ratio of 144.0x.
That says to me right off the bat that it could be overvalued. The HUB24 share price continued to climb in August after what I saw as a positive result.
HUB24 saw earnings before interest, tax, depreciation and amortisation (EBITDA) surge 60% higher to $24.7 million. Platform net inflows were up 27% to $4.95 billion with underlying profit up 49% to $10.1 million.
The company also upgraded its dividend which bodes well for a strong FY21.
The HUB24 share price is now up 66.7% for the year but has had an especially strong last few months. That says to me that momentum could be a factor heading into 2021.
I think the growth story is solid and easy to buy into. The real question is how much investors are willing to pay for those growth prospects.
Normally, I would say that a P/E ratio of 144.0x is too high to buy. However, 2020 is no normal year and the coronavirus pandemic has boosted ASX tech shares higher.
Some of the hottest shares on the market right now like Afterpay Ltd (ASX: APT) haven’t even posted a profit. That means HUB24 could actually be one of the better fintech options on the market right now.
Foolish takeaway
If inflows remain strong and trading volumes can remain high, I think the HUB24 share price could be headed higher. I wouldn’t bet on it happening by December but I think it could be a real chance by early 2021.
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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Hub24 Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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