Is Netwealth (ASX: NWL) a Buy After Surging 12% on Record Half-Year Results?

Netwealth’s record inflows are strong, but valuation is tight

Netwealth Group (ASX: NWL) jumped 12 per cent on Wednesday after posting record half-year results. Revenue rose nearly 25 per cent to A$193.8 million, the company pulled in a record A$16.4 billion in new client money, and funds under administration swelled to A$125.6 billion. Yet even after yesterday’s rally, the stock remains roughly 30 per cent below its 52-week high of A$38.30. That gap between strong business performance and a beaten-down share price is what makes this stock worth watching right now.

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Record Flows and Rising Market Share Signal Legacy Platform Disruption

The numbers are strong, but the real story is about where the growth is coming from. Netwealth is steadily taking market share from the older, clunkier wealth platforms that have dominated Australian financial advice for decades. Those legacy platforms now control just 54.3 per cent of the market, down from 55.8 per cent a year ago, while Netwealth’s share has climbed to 9.2 per cent.

This tells us the growth is structural, not just a short-term boost from rising markets. Financial advisers are actively choosing modern platforms like Netwealth, and once they switch, they rarely go back. The adviser base grew to over 4,000, and managed account flows jumped more than 40 per cent, showing deeper platform engagement. We believe this is Netwealth’s strongest competitive advantage. With legacy platforms still holding over half the market, the runway for share gains stretches out for years.

Strong Margins But the Price Tag Demands Attention

Netwealth’s business model is built for profit growth. Because the platform is software-based, each new dollar flowing in generates revenue at very little extra cost. That showed up clearly in the results, with EBITDA margins holding near 50 per cent and net profit rising close to 20 per cent to A$69 million. The interim dividend was lifted 20 per cent to 21 cents per share, fully franked.

The concern sits on the pricing side. The fee Netwealth earns per dollar managed slipped slightly to 31.1 basis points from 31.4 a year ago. Management says this is mostly due to rising account balances hitting fee caps, not competitive discounting. That is reassuring for now, but if the trend picks up speed, it could weigh on future earnings growth.
Then there is valuation. At around 52 times trailing earnings, Netwealth is priced for consistent execution with no room for disappointment.

The Investor’s Takeaway for Netwealth

The bull case is about patience and long-term growth. Netwealth continues to gain market share, operates with strong margins, and is rolling out new products such as individual HIN services. These target a very large addressable market of around A$600 billion, which could support future growth.

The bear case is simpler. High-valued stocks tend to fall hard if expectations are missed. Any slowdown in fund flows or faster fee pressure could quickly reduce the valuation multiple. The recently resolved First Guardian regulatory issue also highlights that compliance risk remains part of the business.

Overall, we see Netwealth as a high-quality company with clear long-term tailwinds. For growth investors, the 30 per cent drop from its highs offers a more reasonable entry point than six months ago. More cautious investors may prefer to wait for a pullback toward A$22 to A$23 for added safety. Either way, the long-term growth story still looks intact.