Netwealth Group Ltd (ASX: NWL), the diversified financial company has given up its gains after being one of the best performers this year. Despite posting decent result, the stock has lost on the confidence of the investors who believe that the share might be expensive at current point of time even post a fall of 6.6% noted on August 27, 2018 and they might get a better opportunity to enter.

Financial Performance: NWL aims to focus on the cost management while its FY18 total operating expenses increased by $4.6m (12.8%) to $41.0m. There was an EBITDA margin improvement to 50.8% compared to 40.7% in FY17. The group also declared a fully franked final dividend while Funds under administration (FUA) were up 40.9% and Funds under management (FUM) were up 82.1%. However, flat margin forecast with intense competition impacted the price scenario.

Stock fails to give breakout: The start was good with the stock breaking above the resistance level of $7.40 levels in May this year. Thereafter, NWL stock price went on to make higher highs as well as lows, supported by decent volumes. As the stock took a breather from the highs of 9.9, it did respect the support range around $8.40. The Relative strength indicator (RSI) throughout the price movement from May to August formed roughly DOUBLE BOTTOM PATTERN. However, on the volume front, a very negligible activity was witnessed whenever the price moves up indicating that there are few buyers. On the contrary, spikes in the volume is seen when the stock corrects from the higher level. The typical volume movement might imply the shorting activity at the higher levels, indicating low level of confidence in the stock. The sloping trendline shows that the stock has failed to give a breakout from that level and has come crashing down. If we look at the historical trend of the RSI in this stock, only on two instances, the trendline has significantly moved into the overbought zone. On most of the occasions, it has simply touched and ran backwards with price of the stock falling.

There may be chances to return to short-term Exponential moving averages with key growth drivers, if revealed.
 

Sector Comparison by Market Capitalisation (Source: Data from ASX)

As of now with financials at hand and on the basis of PE ratio, the company looks ‘Expensive’ at 151.86x against many peers. Apart from the technical indicators, other developments (including cost factors etc.) have taken a toll on the stock price with some pressure on margins despite increasing Funds scenario.
 

NWL Daily Chart (Source: Thomson Reuters)

 
Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.