The St James’s Place (LSE: STJ) share price fell nearly 20% on 28 February, full-year results day for the financial services firm.
Customer complaints going via the Financial Conduct Authority (FCA) meant firm set aside £426m for potential refunds to clients who overpaid for fees and advice. And it slashed its dividend.
St James’s Place shares have reversed sharply since 2021, and are now down 60% in the past five years. But, are things set to get better?
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First-quarter boost
On 30 April, we had an upbeat update for the quarter ended 31 March. It showed a rise in funds under management (FUM), to £179m, from £168m three months earlier.
CEO Mark FitzPatrick said: “This has primarily been driven through a strong period of investment returns, as our investment proposition continues to deliver for clients.“
So, it seems it’s really just a result of a rise in markets in the past few months. And we shouldn’t just assume the firm’s troubles are behind it and customers are rushing back.
We did see a net inflow too. But it was only a modest £0.71m. And gross inflows came in a bit behind the same quarter last year.
Turning point?
Still, any net inflow at this stage has to be a good sign. It does come at a time when investor confidence is improving by leaps and bounds, however. And against that background, I think some might be disappointed.
The share price barely moved in morning trading. So investors might perhaps not set too much store by this quarter. Not with the big threat of the client overcharging thing hanging over them.
There wasn’t much on that in this latest news, just a bit about “programmes of work to review historic client servicing records and to implement the new charging structure that we announced last October.“
Too cheap to ignore?
At this stage, I’m torn over whether St James’s Place could be a good investment.
I’d have thought that being forced to cut customer charges, and likely refund a big slice of cash, would ruin customer confidence. It still might do, but at this stage it does look like customers remain loyal.
I wouldn’t be loyal if a company I used owned up to having treated me wrongly and overcharged me. But that’s just me.
And if the customers stick around, the stock valuation could make it a buy now.
Valuation
Forecasts show a price-to-earnings (P/E) ratio of less than seven for 2024. That could rise close to eight by 2026, though, as analysts expect earnings per share (EPS) to dip a bit in the next few years.
But even under a tighter charging regime, that still wouldn’t look too stretching. And we have dividend yields of around 5% or so lined up too.
If the investigation brings no more pain than the sum already set aside, St James’s Place could be a nice investment now. Yet there’s still too much uncertainty for me.
