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Netwealth (ASX:NWL) share price may jump – here’s why

Keep a close eye on the Netwealth Group Ltd (ASX: NWL) share price as it released a strong quarterly update for March 2021. How will the Netwealth share price fare?

Netwealth share price

Source: Rask Media NWL 2-year share price chart

Netwealth records strong growth

Netwealth’s top-line or revenue is driven by the volume of funds under administration (FUA) and funds under management (FUM).

Both FUA and FUM continue to increase on the back of solid half-year results (HY21) covered by my colleague, Lachlan Burr-Jensen.

FUA rose by 7.8% relative to the last quarter and 50.1% compared to the prior corresponding period (PCP), being the March 2020 quarter.

As for FUM, this jumped by 12.7% for the quarter and 66.4% relative to the PCP.

Netwealth upholds high standards

Whilst Netwealth performed strongly on the numbers side, it also continued to build its reputation.

Netwealth was ranked first in the industry for transaction tools, reporting, product offering and decision support tools in the Investment Trends 2020, Platform Benchmarking Report.

Further, the business also received the highest net promoter score for a second consecutive year as rated by advisers in the Adviser Ratings 2020 Financial Advice Landscape Benchmarking Study. 

What now for Netwealth?

It appears Netwealth continues to hit the right notes on both the qualitative and quantitative aspects of the business.

As noted by Lachlan Burr-Jensen, investors should monitor the company’s cash balance, which reduced by half for HY21. This may be one reason for the continual decline in the share price.

Another reason may be the recent termination of its agreement with Australia and New Zealand Banking Group Ltd (ASX: ANZ) on interest payable on cash accounts in 12 months.

I think Netwealth is a high-quality business and if the Price to Earnings ratio (P/E) continues to fall from its lofty heights of 67.3x, it could be a quality long-term hold.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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