William O'Neil
"Rathbones presents a classic 'turnaround' story that is not yet proven. The stock fails badly on the most critical CAN SLIM criteria: 'C' (Current Earnings) and 'A' (Annual Earnings). The recent collapse in profits makes it impossible to recommend a BUY at this time. However, it shows significant promise in 'N' (New CEO, transformative merger), 'S' (Buybacks), 'L' (Industry Leader), and 'I' (Institutional Sponsorship). These factors suggest that the potential for a major turnaround is real. The stock is currently building a base and has not broken out. The prudent course of action is to place RAT on a watchlist and hold any existing positions. A buy should only be considered after the company demonstrates a significant and sustained recovery in earnings for at least one to two quarters, confirming that the merger synergies are taking hold and the new leadership is executing effectively."
Overview
This report provides an expert investment analysis of Rathbones Group Plc (LSE:RAT), a leading UK wealth management firm. The analysis is conducted through the lens of William J. O'Neil's CAN SLIM methodology to determine the stock's potential for significant price appreciation and to provide a clear investment recommendation.
Financial and Business Overview
Rathbones Group Plc is a prominent UK-based provider of wealth and asset management services, with a history dating back to 1742. The company recently completed a transformative £839m merger with Investec's Wealth & Investment UK division, creating a powerhouse with over £100 billion in assets under management (AUM). This integration, now over 90% complete, aims to deliver £60m in cost synergies. However, the short-term financial picture is strained. The first half of 2025 saw underlying profit before tax plummet to £10.7m from £112.1m in the prior year, heavily impacted by £23.2m in acquisition costs and market volatility. The group also experienced net outflows of £1.0bn, attributed to client migration during the integration. Despite these headwinds, management has shown confidence by approving a new £50m share buyback program and increasing the dividend by 3.3% to 31p per share, signaling a belief in stronger future performance and a resilient capital base. The firm operates primarily in wealth management for private clients, charities, and trustees, with a smaller but growing asset management arm.
Market Position & Competitive Advantages
Following the Investec merger, Rathbones has solidified its position as one of the UK's largest and most respected discretionary wealth managers. Its primary competitive advantage lies in its long-standing brand reputation, built over 280 years, which fosters trust with high-net-worth individuals and families. The firm's bespoke, relationship-driven service model differentiates it from lower-cost digital platforms. The increased scale from the merger provides enhanced operational leverage and market presence. However, the business faces significant risks. Its revenues are inherently linked to financial market performance; as seen in Q1 2025, market turmoil led to a dip in fee income and a £784m outflow. While the Investec integration appears to be progressing, such large-scale mergers always carry execution risk. The wealth management sector is highly competitive, with peers like St. James's Place (STJ) and Schroders (SDRC) vying for market share. Furthermore, broad economic uncertainty, such as that caused by geopolitical events and US trade policy, can dampen investor sentiment and reduce inflows.
Stock Performance
Rathbones' stock (RAT) has been forming a constructive base pattern over the past year. As of late September 2025, the price is 1816p, which is up approximately 8% year-to-date, showing some resilience. However, it remains about 8% below its 52-week high of 1970p set in August 2025. The 52-week range is a wide 1374p to 1970p, indicating significant volatility. The stock is currently trading above its 200-day moving average (around 1701p), a positive sign of a longer-term uptrend, but has recently dipped below its 50-day moving average (around 1867p), suggesting a short-term pullback. This price action, combined with moderate trading volume, indicates the stock is consolidating and has not yet made a decisive breakout to new highs.
CAN SLIM Analysis
Current Quarterly Earnings Per Share (EPS) Growth:
FAIL: The 'C' in CAN SLIM requires strong, accelerating quarterly earnings. Rathbones fails this test decisively. The company's most recent half-year results (ending July 2025) reported a catastrophic decline in underlying profit before tax to £10.7m, down from £112.1m a year earlier. While management attributes this to one-off merger costs and a difficult Q1, a decline of this magnitude is a major red flag for any growth investor. A turnaround is promised for the second half, but the current numbers are exceptionally weak.
Annual Earnings Increases:
FAIL: A great stock must have a history of significant annual earnings growth. Based on recent performance, Rathbones does not meet this criterion. The trailing twelve-month EPS of £0.59 yields a high P/E ratio of over 30, and recent reports point to declining, not growing, profits amid market headwinds and integration costs. While the long-term history of the company is stable, the recent track record of earnings growth required by this rule is absent.
New Products, Management, or Price Highs:
PASS (with caveats): This is the stock's most compelling feature. Rathbones has several powerful 'New' elements. First, the transformative merger with Investec W&I is a game-changer, fundamentally increasing the company's scale. Second, a new Group Chief Executive, Jonathan Sorrell (former President of Man Group), was appointed in March 2025, bringing fresh leadership. Third, the company has initiated a new £50m share buyback program. The major element missing is a new price high; the stock is still trading below its 52-week peak, which prevents this from being a full-throated PASS.
Supply and Demand:
PASS: The forces of supply and demand are becoming favorable. The board has approved a substantial £50m share buyback program, which will reduce the supply of shares on the market. Furthermore, there has been recent insider buying, with the new CEO and other executives making small but consistent purchases. This signals strong management conviction and aligns their interests with shareholders. This decreasing supply and insider demand is a bullish technical indicator.
Leader or Laggard:
PASS: Rathbones is a definitive leader in its field. It is one of the oldest and most prestigious wealth management brands in the UK. The merger with Investec has propelled it into the top tier of UK wealth managers by AUM. While the stock's recent price performance has not been market-leading, the company itself is a dominant player in its industry, which is what this rule looks for.
Institutional Sponsorship:
PASS: The stock has strong, high-quality institutional sponsorship. Reports indicate institutional ownership is between 60% and 80%. Critically, the largest shareholder is Investec Ltd's Asset Management arm, holding a 26% stake as a result of the merger. The presence of numerous, well-regarded institutions on the shareholder register is a powerful vote of confidence in the company's long-term prospects.
Market Direction:
NEUTRAL: The general market is in a tricky spot. While Rathbones' own Q2 2025 commentary noted a 'stampede into European equities' and potential for a European recovery, it also highlighted a 'Global Economic Policy Uncertainty Index' at its highest level since the Covid crisis. The major US indices have experienced a correction. For a stock to make a major move, it needs the wind of a bull market at its back. The current market is choppy and not in a confirmed uptrend, which calls for investor caution.
Conclusion
Rathbones presents a classic 'turnaround' story that is not yet proven. The stock fails badly on the most critical CAN SLIM criteria: 'C' (Current Earnings) and 'A' (Annual Earnings). The recent collapse in profits makes it impossible to recommend a BUY at this time. However, it shows significant promise in 'N' (New CEO, transformative merger), 'S' (Buybacks), 'L' (Industry Leader), and 'I' (Institutional Sponsorship). These factors suggest that the potential for a major turnaround is real. The stock is currently building a base and has not broken out. The prudent course of action is to place RAT on a watchlist and hold any existing positions. A buy should only be considered after the company demonstrates a significant and sustained recovery in earnings for at least one to two quarters, confirming that the merger synergies are taking hold and the new leadership is executing effectively.
Research Sources (19 found)
Rathbones Group (RAT) Share Price, News & Analysis
Published: 8/5/2025
Rathbones: Fee income dips amid market turmoil
Published: 5/8/2025
Institutional investors are Rathbones Group Plc's (LON ...
Published: 7/15/2025
Rathbones Group PLC, RAT:LSE summary - FT.com
Published: 4/7/2025
Rathbones is rated "Excellent" with 4.4 / 5 on Trustpilot
Published: 7/3/2025
Rathbones Group (RAT) Competitors and Alternatives 2025
Published: 9/23/2025
Why UK wealth managers are a hidden value play
Published: 7/30/2025
Rathbones UK investment management review: what are the pros and cons?
Published: 6/23/2025
Daily Stock Market Report (Thur 8 May 2025)
Published: 5/8/2025
Bain Capital and Stone Point eye £900m takeover of UK wealth adviser Amber River
Published: 9/17/2025
Radian to buy Lloyd's syndicate Inigo for $1.7 billion in specialty insurance push
Published: 9/18/2025
Director/PDMR Shareholding | Company Announcement
Published: 9/4/2025
Rathbones Asset Management | UK financial advisers
Published: 7/14/2025
Non-bank access to liquidity: the path ahead is clear
Published: 8/5/2025
Rathbones profit drops but second half growth expected
Published: 7/30/2025
Quarterly Investment Update Q2 2025: Separating uncertainty from risk as we prepare for what's ahead
Published: 3/28/2025
Review of the week: Evergrande, nevermore?
Published: 7/22/2025
Rathbone Income Fund | Rathbones
Published: 6/1/2025
Investing in armaments: has anything changed?
Published: 7/22/2025
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