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Is the Class Ltd (ASX:CL1) share price attractive after reporting more account growth?

The Class Ltd (ASX: CL1) share price will be one to watch today after it reported its quarterly update.

According to Class, the total accounts increased by 5,158 to a total of 169,413. This total includes 163,464 self-managed super fund accounts (SMSF) and 5,949 Class Portfolio accounts.

Total Class customers increased to 1,367, which was an increase of 51 over the last quarter.

What may concern some shareholders is that the June growth was the lowest compared to the June quarter in FY14, FY15, FY16 and FY17.

Class attributed some of the blame to the workload surrounding CGT relief and flow-on delays to tax lodgements which has meant 35% of SMSF Annual Returns haven’t been lodged. The number of SMSFs on Class Super increased by 4,526 despite AMP Limited (ASX: AMP) continuing to migrate accounts off Class. There are still 8,300 accounts left to migrate.

In Class Portfolio the number of accounts grew by 12% to 5,949. In addition to that, 31% of Class Super clients now use Class Portfolio.

The accounting software company was pleased to report that it has been ranked number one of the highest overall client satisfaction and number one for value for money in the 2018 Investment Trends SMSF Software Awards.

Is Class a buy?

Class has come a long way down from its $3-ish price that it had been trading at for a long time. It’s now $2.49, it has recovered since April but it’s still lower, perhaps justifiably lower.

Class’ growth rate has declined and there is a lot of negativity surrounding the SMSF industry due to revelations in the Royal Commission.

There are several superannuation funds that allow you to invest directly in ASX 300 shares, you don’t need a SMSF to do that anymore. However, Class Portfolio could be the key to growth over time.

It’s currently trading at 37x FY17’s earnings and it probably still is trading expensively to FY18’s earnings. Until Class Portfolio becomes a bigger part in earnings I wouldn’t suggest buying in this uncertain environment.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Class Limited. 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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