Why I think Praemium Ltd looks set to keep growing in 2018

The Praemium Ltd (ASX: PPS) share price has gained almost 60 per cent in the past year and it appears it will keep going up in 2018.

Praemium, which provides portfolio administration, investment platforms, and financial planning tools to the wealth management industry, has emerged as a company which investors are increasingly taking notice of.

In financial year (FY) 2015 the company, which listed on the ASX in 2006, reported its first year of profit with $2.2 million EBITDA.

For FY 2016 Praemium reported EBITDA of $3.8 million and net profit before tax of $1.5 million.

And Praemium kept up the momentum in FY 2017 with the company announcing another year of record profit which came in at about $2.2 million before tax.

The software company now has 9 offices globally and 800 clients covering $100 billion in assets and recently announced that it had surpassed $7 billion in platform funds under administration.

But while the company does offer promise for 2018, some investors may be put off by the fact that shares in Praemium are going for more than 400 times the company’s trailing earnings, significantly above the industry average of about 30 times earnings.

On the other hand, when compared to Onevue Holdings Ltd (ASX: OVH), with its shares trading for more than 600 times earnings, Praemium may not appear so expensive.

However, another investment platform provider, Hub24 Ltd (ASX: HUB), with its shares changing hands for about 30 times earnings may be more appealing to some.

Hub24 Ltd, with more than $6 billion in funds under administration, is not too far off Praemium.

And while it appears that Praemium is well positioned to continue its growth story in 2018, it also seems that Hub24 may represent better value coupled with the opportunity of further growth.

For FY 2017 Hub24 reported a profit of $20.8 million, up 91 per cent on the previous year.

As such, those who are interested in getting in on the investment platform provider space may do well to take a closer look at Hub24 before jumping on Praemium.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Onevue Holdings 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 Bruce Jackson.

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