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Why Netwealth Group Ltd shares stormed higher today

One of the biggest movers on the local market today has been the Netwealth Group Ltd (ASX: NWL) share price.

In afternoon trade the financial services company’s shares are 6% higher at $6.49.

Incredibly, this means that Netwealth’s shares have now gained 75% since landing on the ASX at $3.70 per share in late November.

Why are they higher today?

Today’s gain is attributable to a positive quarterly business update released this morning which revealed a strong rise in funds under administration (FUA).

According to the release, FUA at the end of December had reached $15.4 billion. This was a 13% quarter-on-quarter increase and a 58% increase on the prior corresponding period.

This quarterly increase was driven largely by net fund inflows of approximately $1 billion.

Investors and wealth professionals appear to be impressed by the award-winning Netwealth platform and it isn’t hard to see why. The platform is currently rated Australia’s number one platform based on functionality and overall satisfaction.

Should you invest?

Considering Netwealth had targeted FUA of $15.2 billion for FY 2018 in its prospectus, I think the company has a great chance of outperforming its forecasts this year.

However, with a market capitalisation approaching $1.5 billion now, I estimate that its shares are changing hands at approximately 50x FY 2018 earnings.

This is quite expensive and investors may find more value in the shares of rivals Praemium Ltd (ASX: PPS) or Onevue Holdings Ltd (ASX: OVH).

My preference in the industry continues to be fintech star Praemium. I was very impressed with its recent trading update and the strong growth it reported in FUA. Overall I believe its shares are good value given its current growth profile and have the potential to provide outsized returns for shareholders over the long-term.

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Motley Fool contributor James Mickleboro 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.