The Praemium Ltd (ASX: PPS) share price has rocketed more than 7.6% higher in early trade after the company announced a major expansion in its relationship with Morgan Stanley Wealth Management Australia.
What did Praemium announce this morning?
Praemium currently provides non-custodial reporting for 2,500 investor portfolios with domestic assets through its Virtual Managed Account (VMA) reporting solution.
Under the expanded relationship, a further 2,500 portfolios with international assets will be added to VMA with Praemium to provide portfolio administration and taxation reporting for portfolios with international investments.
The company expects these portfolios to be transitioned over the next 2-3 months, with an incremental contract value of approximately $1 million per year.
Is Praemium in the buy basket?
This morning's expansion announcement is a big deal for the wealth management services firm, which has seen its share price fall 52% from its September high of $1.18 per share.
The company currently has a market cap of $222.9 million but has fallen to its lowest level since late 2017.
Despite some positive signs that it might be back on the growth path to higher profitability, the company is currently trading at an astonishing P/E multiple of 154x earnings. That's a lot of growth built into a share price, and given the recent declines, I'd be wary of jumping into Praemium over the likes of Altium Ltd (ASX: ALU) or Appen Ltd (ASX: APX).
In terms of the wealth services platforms, Praemium's chief competitor Hub24 Ltd (ASX: HUB) has a market cap of $829.8 million but also trades at a relatively lofty 101x earnings.
The Hub24 share price has risen 4.7% in the last 6 months with plenty of volatility of its own but outpaced the $1.88 billion Netwealth Group Ltd (ASX: NWL) which is marginally down over the same period.
For those who aren't so keen on the wealth management services companies, maybe this top-rated stock in a booming industry could be the key to unlocking portfolio growth in 2019.
