HUB24 operates Australia's fastest-growing specialist investment platform, charging advisers a fee on every dollar they manage through its system. At A$97.50 against a fair value of A$42.23, the stock is 57% overvalued. The business is exceptional — the price is not.

HUB24 is best suited to quality investors with a long time horizon who already hold the stock at a lower cost base. The business ticks every quality criterion — wide moat, exceptional management, negative working capital, and compounding free cash flow — but that quality is fully reflected (and then some) in today's share price. Investors buying now are paying for perfection in a company that genuinely earns it.

HUB24 is a wealth technology platform that earns a fee — around 32 basis points — on every dollar of client money advisers administer through its system. The more money on the platform, the more HUB24 earns. It also sells software to accountants through its Class subsidiary, giving it a distribution channel that competitor Netwealth cannot replicate.

The most recent half-year results were genuinely impressive. Net inflows hit a record A$10.7bn in a single six-month period, pushing funds under administration to A$127.9bn. Revenue grew 26% and the operating margin expanded to 42.7%. Management has upgraded its FY27 FUA target twice in 18 months.

The investment tension is stark. The business is among the best on the ASX — a structural market share winner with a 7-to-10-year competitive advantage, expanding margins, and management who hold A$89m of their own money in the stock. But none of that changes the maths. Our discounted cash flow analysis uses a 12% cost of capital — appropriate for a company whose revenue moves with equity markets — and produces a fair value of A$42.23. At A$97.50 versus fair value of A$42.23, the stock is 57% overvalued.

What happened?

HUB24's first-half FY26 result was its best yet. Record net inflows of A$10.7bn came overwhelmingly from existing adviser relationships rather than new client acquisition — a sign of deepening trust rather than a one-off surge. Revenue of A$245.9m grew 26% on the prior period and the EBITDA margin expanded to 42.7%, well ahead of the prior full-year rate of 39.9%. Management reaffirmed its FY27 FUA target of A$160-170bn.

What's next?

The margin expansion story has further to run. Each dollar of new FUA flows through a largely fixed cost base, producing operating leverage of 1.33x in the current year. We expect EBITDA margins to reach 44-45% by FY28-29 before stabilising.

Two regulatory tailwinds are accelerating the business. The Delivering Better Financial Outcomes reforms passed their first tranche in July 2024, with a second tranche in draft form — this is expected to expand the pool of Australians receiving financial advice by 10-15%, directly growing the market HUB24 addresses. A trustee internalisation approval from APRA would eliminate the A$100m facility tied up in regulatory capital, freeing balance sheet capacity.

The key uncertainty is myhub, a next-generation adviser platform requiring A$30-50m of investment through FY28. Management has not disclosed a monetisation model. It represents genuine optionality but should not anchor valuation until commercial terms are known.

The entire valuation debate comes down to one number: the discount rate. HUB24's revenue is directly linked to equity markets — when the ASX falls 20%, FUA falls 10-12% almost immediately, and revenue follows. That makes a 12% cost of capital appropriate under standard CAPM. The market appears to be pricing the stock as though it deserves something closer to 7.5-8%, treating the recurring adviser fees as bond-like in their stability. They are recurrent, but they are not stable — and that distinction matters enormously in a discounted cash flow.

At 38x forward EBITDA, the stock has almost no room for error. A single quarter of slowing net inflows, a meaningful ASX correction, or a re-rating of the growth premium in the broader market could compress the multiple to its historical trough of 22-25x — a 30-40% drawdown from today's price without a single dollar of earnings being lost. The business would survive that comfortably. Shareholders buying today would not enjoy the ride.