MENU

This stock is up 1,140% since 2008

Sometimes the ugliest businesses are the best performing.

Take “receivables management” company Credit Corp (ASX: CCP). The company’s core business, per that euphemism, is to buy overdue consumer debt and then try to collect on it. Credit Corp isn’t alone in this space — smaller competitor Collection House (ASX: CLH) does much the same thing – but it’s arguably Australia’s dominant play on this line of business.

A 1,140% return in five years

You might be inclined to feel squeamish and look away, but first, consider Credit Corp shares’ returns. The company’s stock is up a stunning 1,140% in the last five years, not including dividends, compared with a meager 5% return in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO). This is down to not only the profitable nature of the business but also to a deeply discounted share price circa 2008.

Of course, the question for investors today is whether Credit Corp can succeed in the future – whether the company can keep growing.

And the answer looks to be yes. Credit Corp has recently expanded into the comparatively massive receivables management market in the U.S. Despite some short term uncertainty in this new line of business, the long term future should be positive, considering Credit Corp’s conservative approach to the expansion and its expertise in the field.

The company has also expanded into the consumer-loans business in Australia. The loan book is already nearly $19 million, and the company reports that it has additional related products in “pilot” mode that are seeing solid results.

The takeaway for Foolish investors

On the promise of these new business lines as well as the strength of Credit Corp’s core business, the company’s shares should beat the market over the medium and long term. That such a promising company is still so underfollowed helps create the opportunity – Credit Corp shares are no retail investor favourite, and trade for just over 14 times earnings while paying a fully franked dividend with a yield in the 3.7% range.

If you’re in the market for another great investment idea, don’t miss this! Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool writer/analyst Catherine Baab-Muguira owns no shares in any company mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.