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Should you buy Slater & Gordon in 2014?

Slater & Gordon (ASX: SGH) is a very well established organisation that has been steadily growing its profits for many years. The company is a multinational law firm, headquartered in Australia, employing over 1,600 people worldwide. In 2012, Slater & Gordon acquired a number of UK legal businesses and has since become one of the UK’s leading personal law firms.

Slater & Gordon was founded in Australia in 1935. The company has grown from quite humble beginnings, servicing the needs of unions and working people. With the stated mission to give everyday people easier access to world class legal services, Slater & Gordon has built a powerful reputation as a law firm that fights to achieve the best outcomes for its clients.

The company provides specialist legal services to individuals and groups. Its services cover all areas of liability and compensation law, as well as family and relationship law, conveyancing, wills and estate planning. Its Business & Specialised Litigation Services includes commercial, estate and professional negligence litigation and class actions.  The firm is well known for its experience in running complex and large-scale class actions. One of many innovations that work well for the business is the “No Win – No Fee” offer to clients, ensuring that more people are able to access affordable legal services.

Slater & Gordon continually uses a strategy that involves consolidation of the national personal injuries litigation market, extension of the geographical reach of the business and expansion of the range of services offered to clients. Accordingly, the company is pursuing an ongoing acquisition program and organic growth of the business through advertising and other national brand building initiatives. In addition, the company seeks to benefit from system and process efficiencies.

Earnings have grown steadily from 12.9 cents per share for the year ending June, 2007 to 23.6 cents for the year ending June, 2013.  Debt to equity is a reasonable 14.9% with interest cover an acceptable10.8 times. Return on equity is 12.0, which is also positive for the investor.

Foolish takeaway

Slater & Gordon is not capital intensive. Thus there should never be a need for its shareholders to subsidise the company. This is a good share to be bought for long-term growth with little risk of disappointment. Although the dividend is relatively small, at 2.4% fully franked for the year ending June 2013, there is a record of increasing dividend payouts as time evolves.

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Motley Fool contributor Chris Koenig does not have shares in any of the companies mentioned.

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