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Why the HUB24 share price stormed 8% higher on Tuesday

The HUB24 Ltd (ASX: HUB) share price has been a strong performer in morning trade on Tuesday.

At the time of writing the award-winning investment and superannuation platform provider’s shares are up 4.5% to $12.18.

At one stage its shares were as much as 8.5% higher at $12.64.

Why is the HUB24 share price storming higher today?

Investors have responded positively to an announcement out of HUB24 this morning that revealed that its investment and superannuation platform reached a new funds under administration (FUA) milestone of over $10 billion in the December quarter.

This is an increase of over 20% since the end of FY 2018 when FUAs stood at $8.3 billion and has been driven by strong demand for its offering.

In fact, management advised that its growth has been so strong that it has maintained its position as the fastest growing company in the industry in percentage terms relative to its size.

In addition to this, the latest available data from Strategic Insights has HUB24 in overall 2nd place for quarterly net inflows as at September 30 2018.

Managing director Andrew Alcock was delighted with the company’s performance in spite of challenging financial markets.

He said: “In the midst of structural change and much distraction across the industry we have maintained momentum with advice networks and individual practices continuing to choose HUB24 because of our commitment to constant innovation, market-leading technology and superior customer service. In many cases our clients are moving away from relationships with incumbent platform providers, and transitioning FUA to HUB24.”

What’s next?

The good news is that Mr Alcock believes that HUB24 is well-positioned for further growth due to current market dynamics and a strong pipeline of business.

He added: “HUB24’s strong pipeline of new business is testament to our strategy and continued investment, with the expertise of our subsidiary Agility Applications and the new functionality of ConnectHUB contributing to HUB24 being chosen to provide platform solutions. We are very pleased that two large national brokers chose HUB24 during the last quarter.”

Should you invest?

I’m a big fan of HUB24 and think it is well worth considering an investment, though it is a reasonably high risk option due to the sky high earnings multiples that its shares trade on. HUB24’s shares are currently priced at 67x estimated forward earnings.

A more reasonably priced alternative could be Bravura Solutions Ltd (ASX: BVS) which I estimate to be trading at around 30x forward earnings or Praemium Ltd (ASX: PPS) which is priced at approximately 40x forward earnings.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia owns shares of Bravura Solutions 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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