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3 top companies to beat banking stocks

There is no denying that Australia’s big banks including Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ) have been exceptional performers for investors in the last 12 months.

But as valuations continue to rise and relative dividend yields fall, investors should not ignore alternative finance related companies, many of which offer quality, value and strong growth outlooks.

Three of the best alternatives right now in my view are FlexiGroup Limited (ASX: FXL), Ozforex Group Limited (ASX: OFX) and Yellow Brick Road Holdings Ltd (ASX: YBR).

1. FlexiGroup offers finance options to help consumers and businesses buy the goods they need. The company has several different product lines, including credit cards, interest free finance and leasing from which it profits by charging fees.

Shares in FlexiGroup are lounging around 52-week lows and look attractive given its current dividend yield (4.4%) and prospective long-term growth.

Last month the company reaffirmed its full-year 2014 guidance of $84-86 million NPAT which will be an increase of up to 19% over FY13.

2. OzForex Limited only started trading on the ASX last year, but has already taken shareholders on a wild ride. Shares were slammed more than 20% last month when the company announced its full year result.

It seemed investors were unimpressed with the company’s profit despite beating prospectus estimates and reporting a huge NPAT margin of 22% for the full year. Growth is expected to continue and the recent share price fall could prove to be a great opportunity to buy.

3. Rapidly growing wealth management company Yellow Brick Road is another top alternative to shares in the big banks. The company has branches throughout Australia and has aggressive plans to grow further through acquisitions.

Yellow Brick Road may be small, but is backed by cornerstone shareholder Macquarie Group Ltd  (ASX: MQG) and is forecasting a maiden profit in FY15.

One more top company to beat the banks...

It's not hard to find great value companies away from the lofty valuations of the big banks. Many of these companies will offer better potential returns over the long term being nimble, fast growing companies.

One stock that definitely ticks all the boxes is The Motley Fool's #1 stock for 2014The Motley Fool has issued a firm "BUY" rating on this small but ultra promising ASX company... and you can get the name and code FREE right now. Click here for your free copy of "The Motley Fool's Top Stock for 2014."

Motley Fool contributor Regan Pearson owns shares in FlexiGroup Limited.

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