AJ Bell's Sustainable Earnings Growth and Insider Alignment Signal Strong Long-Term Investment Potential

AJ Bell (LON:AJB) has emerged as a compelling long-term investment opportunity, driven by its consistent earnings per share (EPS) growth, robust revenue performance, and strong alignment between insiders and shareholders. These factors collectively underscore the company’s ability to navigate market challenges while delivering value to investors.

Sustainable EPS Growth: A Track Record of Resilience

AJ Bell’s financial performance over the past five years demonstrates a remarkable ability to compound earnings. According to a report by Simplywall.st, the company has achieved an average annual EPS growth rate of 20.2% over this period, with a more aggressive 32% compounded annual growth rate in the last three years [4]. This acceleration reflects disciplined cost management and a focus on high-margin services, such as its advised and direct-to-consumer (D2C) platforms. For instance, in the year ending 30 September 2022, diluted EPS rose 6% to 11.35 pence [4], while a single year saw a 45.65% surge in EPS [5].

However, the most recent growth rate has moderated to 23.33% [5], raising questions about sustainability. Analysts at Citi attribute this to higher variable remuneration, which has reduced estimated earnings for 2024 and 2025 [5]. Despite this, AJ Bell’s trailing 12-month EPS of 0.22 pence [3] and its ability to maintain a 20.2% average growth rate over five years suggest resilience. The company’s recent Q3 2025 trading update, which saw a 15% year-on-year increase in assets under administration (AUA) to £96.1 billion [2], further reinforces confidence in its earnings model.

Revenue Momentum and Strategic Innovation

AJ Bell’s revenue performance has been equally impressive. In Q3 2025, the company reported underlying gross inflows of £4.0 billion and net inflows of £2.1 billion, driven by a 17% year-on-year increase in customer numbers [1]. Assets under administration grew 6% quarter-on-quarter, reflecting strong demand for its platform services. This momentum has prompted Berenberg analysts to raise their target price for AJ Bell from 420.00p to 490.00p, citing the 6% quarterly AUA growth and robust net inflows [6].

The company’s strategic investments in new platform propositions, such as Dodl by AJ Bell and Touch by AJ Bell, are also broadening its market reach [5]. These initiatives, combined with a 45.1% rise in transactional revenue in H1 2025 [1], highlight AJ Bell’s ability to innovate while maintaining profitability. Notably, the company raised its 2025 pre-tax profit margin forecast to over 42%, up from 40%, driven by a 12% increase in half-year profit [1]. This underscores its capacity to convert revenue growth into earnings, a critical factor for long-term shareholder value.

Insider Alignment and Shareholder Returns

A key indicator of AJ Bell’s long-term investment potential is the alignment between insiders and shareholders. Insider ownership stands at 23.69% in 2025 [1], a figure that has remained consistent across multiple sources. This level of ownership, coupled with insider transactions totaling £438.80K in purchases and £158.45K in sales over the last 12 months [1], suggests confidence in the company’s strategic direction.

AJ Bell has also prioritized returning capital to shareholders. In H1 2025, the company returned £64.0 million through a £34.0 million final dividend and a £30.0 million share buyback program [2]. Additionally, it announced a 25 million-pound share buyback and a 6% increase in its interim dividend to 4.50 pence per share [1]. CEO Michael Summersgill emphasized the importance of returning surplus capital, reinforcing the company’s commitment to its capital allocation framework [2]. This alignment between management and shareholders is a strong signal of long-term value creation.

Challenges and Forward-Looking Outlook

While AJ Bell’s fundamentals are robust, the company faces headwinds. The broader financial sector is grappling with shifting interest rate expectations and global trade uncertainties, such as the U.S.-China tariff war [3]. These factors have led to volatility in investor sentiment and impacted companies reliant on global markets. Additionally, the median consensus forecasts an average annual decline of -10.7% in EPS growth over the next five years [2], driven by higher variable remuneration and sector-wide pressures.

However, AJ Bell’s strong balance sheet, high customer retention rate, and focus on innovation position it to mitigate these risks. The company’s recent investments in technology and brand development [2] are designed to drive long-term growth, even in a challenging environment.

Conclusion

AJ Bell’s combination of sustainable EPS growth, strong revenue performance, and insider alignment makes it a compelling long-term investment. While near-term challenges exist, the company’s disciplined capital allocation, strategic innovation, and resilient business model position it to deliver value over the long term. Investors seeking exposure to a financially sound, growth-oriented financial services firm should consider AJ Bell as a core holding.

Source:
[1] AJ Bell : Q3 trading updateThree months ended 30 June 2025 [https://www.marketscreener.com/news/aj-bell-q3-trading-updatethree-months-ended-30-june-2025-announcement-ce7c5cd3da8df627]
[2] AJ Bell plc Interim Results for the six months ended 31 March 2025 [https://www.ajbell.co.uk/group/investor-relations/market-announcements/interim-results-5]
[3] AJ Bell (AJB) Insider Trading Activity 2025 [https://www.marketbeat.com/stocks/LON/AJB/insider-trades/]
[4] AJ Bell (LSE:AJB) - Earnings & Revenue Performance [https://simplywall.st/stocks/gb/diversified-financials/lse-ajb/aj-bell-shares/past]
[5] AJB | AJ Bell PLC Annual Income Statement [https://www.marketwatch.com/investing/stock/ajb/financials?countrycode=uk]
[6] Berenberg hikes target price on AJ Bell following 'strong' Q3 [https://www.markets.iweb-sharedealing.co.uk/research-centre/market-news/article/?id=20449212&type=bsm]