Hub24 Ltd (ASX: HUB) and Netwealth Group Ltd (ASX: NWL) shares have been incredible investments over the past five years.
Since this time in 2021, the two investment platform providers' shares have risen 230% and 75%, respectively.
Meanwhile, the shares of their small rival Praemium Ltd (ASX: PPS) have gone backwards.
But following a strong quarterly update, Bell Potter thinks this ASX tech stock could be destined to follow in the footsteps of Hub24 and Netwealth and generate market-beating returns for investors.
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What is the broker saying?
Bell Potter was pleased with Praemium's performance in the third quarter. It commented:
PPS has delivered a positive update, with signs that new client wins are beginning to translate into stronger flows. Given the different stages on each, we see this being a gradual benefit. For the first time since its launch 15-months ago, continued flows into Spectrum were more advanced than the trend. PPS is now absorbing some attrition from departing OneVue advisers following completion of the migration. Conditions are improving beneath the surface, with further upside to be unlocked, as evidenced by Powerwrap's stabilisation. PPS also highlighted two key multi-year client renewals, a welcome development after the loss of a large account.
Overall, the broker believes the result demonstrates that the worst is now behind this ASX tech stock and it could be onwards and upwards from here. It adds:
We see the result proofing execution and product development. Spectrum saw record gross inflows of $708m in challenging conditions and the quieter period, compared to the regular profile around $445m and BPe of $587m. The recovery narrative remains intact with PPS tracking to records. Including outflows and adviser exits, Spectrum net inflows printed $502m against BPe $441m. Powerwrap's net inflows improved further on the pcp to $94m ahead of BPe $62m despite sales coming in below expectations.
Should you buy this ASX tech stock?
According to the note, the broker has retained its buy rating and $1.20 price target on its shares.
Based on its current share price of 75.5 cents, this implies potential upside of almost 60% for investors over the next 12 months.
It also expects a handy 3.5% fully franked dividend yield over the period.
Commenting on its buy recommendation, the broker said:
Following the update we have upgraded EPS +2%/+0%/+1%. Conditions continue to improve for PPS. New drivers are in play that should support a re-rating of the shares, in-line with PE transaction multiples. This would suggest an $800m enterprise value.
