A summer earnings season winner: IntegraFin gaps higher on Q3 momentum

With the summer earnings season in full swing, some stocks are making their move, and IntegraFin (IHP) is one of the standout performers…

A quick recap: IntegraFin’s tech edge

IntegraFin’s core strength lies in its advanced technology, particularly its flagship Transact platform, which provides financial advisers with a market-leading tool for managing investments and client portfolios. The platform generates revenue through fees on assets under direction (FUD), transaction volumes, and custody services, benefiting from both user growth and asset appreciation.

IntegraFin also differentiates itself through its proprietary CURO software, built on Microsoft Dynamics 365 and Power Platform, which enhances its service offering with integrated CRM, data analysis, and client engagement tools. This suite of technologies has propelled IntegraFin ahead of its competitors, securing its place at the forefront of the UK’s fintech sector.

Q3 update: Exceptional growth and strategic moves

IntegraFin’s recent Q3 trading update was a clear standout, demonstrating significant growth across key metrics. Net inflows to the Transact platform totalled £1.2 billion, an 84% increase compared to the same period last year. This marks the fourth consecutive quarter of growth, underscoring the platform’s continued appeal to clients and advisers. Gross inflows for the quarter were £2.5 billion, further reinforcing the company’s strong position in the market.

The update also highlighted the growing client base, with 244,734 clients now using Transact, a 5% increase over the past year. This expanding client base demonstrates the platform’s increasing market share, as advisers and clients alike are drawn to its ease of use and robust capabilities. Furthermore, IntegraFin saw a reduction in outflows, a crucial development for ensuring long-term growth. With £69.5 billion in funds under direction (FUD) at the end of Q3, a year-on-year growth of 11%, the platform is not only attracting new clients but also retaining existing ones effectively.

IntegraFin’s strong performance is also supported by ongoing technological investments and a focus on service excellence. The company is conducting a group-wide cost review to unlock further efficiencies and productivity gains. This initiative should help improve operating margins and ensure that IntegraFin remains competitive in the long run, despite any potential margin pressures from lower charging bands on FUD.

Paying up for quality

While IntegraFin’s valuation can’t be considered cheap, we believe it is worth paying up for the financial quality it offers. The company’s ability to consistently deliver strong growth, impressive client numbers, and robust cash flow underpins its premium valuation. The stock is trading at a price-to-earnings (P/E) ratio of 21.1, reflecting investor confidence in the company’s long-term growth potential. Additionally, a price-to-free cash flow ratio of 3.7 demonstrates the company’s strong cash generation capacity.

IntegraFin’s return on equity (ROE) stands at 24.7%, showcasing its efficient use of capital. The price-to-book ratio of 6.1 reflects the intrinsic value embedded in the company’s market-leading technology and growing client base. Though the stock is priced at a premium, its solid financials and continued growth justify the higher valuation, positioning IntegraFin as an attractive investment for those seeking quality in the fintech space.

Gap creates burst of bullish momentum

IntegraFin’s strong Q3 performance, impressive net inflows, and operational efficiency initiatives set it up for continued growth, making this an ideal time to add to our position.