Morningstar pragmatic on ‘ritzy’ Netwealth multiples

Mike Taylor

Managing Editor and Publisher

20 April 2026

Research and ratings house Morningstar has flagged the possibility of platforms such as Netwealth facing increased operating costs and slower net flow growth compared with the past as a result of regulatory actions in the wake of the Shield and First Guardian collapses.

Looking at the firm’s third quarter FUM data, Morningstar raised the possibility at the same time as suggesting the market may be unduly optimistic about Netwealth.

Whilst lifting its fair value estimate for Netwealth by 25 to $17.10 per share, Morningstar lowered its near-term funds under administration (FUA) forecast.

“Unlike the market, we expect future net flows to moderate. This is due to competitive pressures and heightened regulatory scrutiny following recent fund collapses. This scrutiny is likely to slow growth as weaker fund managers are weeded out and mor rigorous due diligence is instituted,” the ratings house said.

“Current multiples remain ritzy and assume aggressive growth. Shares trade at more than 46 times the consensus median EPS for fiscal 2026, a premium that appears unjustified given consensus EPS growth of roughly 12%-18% over the next three years,” it said.

“We forecast low- to mid-teens EPS growth over both three- and five-year periods. This aligns with consensus, which implies investors either expect significantly more than the median forecast or are comfortable valuing Netwealth at much higher multiples. Our forecasts are for: (1) revenue growth averaging 15% per year for the next five years, supported by continued market share gains (net inflows) in the platform market and the compounding of FUMA, and (2) EBITDA margins averaging 51% through fiscal 2030.”

The Morningstar analysis said that while its projected 51% EBITDA margin is in line with the five-year average, reflecting its expectation of maturing growth it believed Netwealth would need ongoing investment in product enhancements and higher recurring compliance expenditure.

“Notably, following the Shield/First Guardian fund collapses, a portion of which was invested with Netwealth, Treasury is proposing a requirement for platform trustees to compensate members for losses stemming from external fraud or theft. While Netwealth willingly compensated members in that specific instance, a formal law would codify this liability,” it said.

“We don’t expect Netwealth to be a direct casualty if such a law were passed. However, it will likely prompt platforms like Netwealth to ramp up due diligence and onboard only high-rated, lower-risk asset managers. But the result is a likely structural increase in operating costs and slower net flow growth compared with historical averages.”