Most Australian investors are focused on the big banks, from Commonwealth Bank (ASX: CBA), which reports today, to Westpac (ASX: WBC). But they’re missing a much more promising – and arguably, reasonably priced – finance company.
Spotlight on FlexiGroup
Consumer finance player FlexiGroup (ASX: FXL) has a $1.3 billion market cap and is in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO), but it’s lesser known. It’s also, perhaps, harder to understand. The company has historically had a focused business in consumer point-of-sale leases through retailers like Harvey Norman (ASX: HVN), but more recently, has expanded into interest-free credit cards and “no interest ever” loan services.
The outcome is that the company’s business is far less tied to consumer spending than it once was, and that it could continue to grow for years to come as it wins more market share in the interest-free credit card and loan space. This market position also allows the company to earn additional revenue through lucrative cross-selling to its customer base.
A chance for capital gains and fully franked dividends
Over the last five years, net profits have grown from $32.3 million to $65.8 million, much faster than the top line, and management is targeting 17% to 19% growth in 2014. With so many ASX shares looking seriously overpriced relative to their growth potential, it’s exciting to see Flexigroup shares trading for a far more reasonable multiple of about 19 times trailing earnings.
In short, if investors are looking for ‘growth at a reasonable price’ they might do far worse than Flexigroup shares, which also pay a fully franked dividend with a yield over 3%.
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Motley Fool writer/analyst Catherine Baab-Muguira owns no shares in any company mentioned in this article.