The business models of certain financial companies offer some of the most appealing investment credentials on the entire ASX. The reason for this is the profit margins and the leverage to higher revenues off a relatively fixed cost base that financial companies such as the following five enjoy.
These four stocks are all very profitable businesses already, but with strong pipelines of growth and good leverage their futures look great and investors should keep them on their watchlists.
1) Platinum Asset Management Limited (ASX: PTM) and Magellan Financial Group Ltd (ASX: MFG) have forged solid positions as Australian-based leading fund managers of international equities. While they are already in pole position, there is massive scope for their businesses to grow much further, particularly as Australians’ superannuation accounts are seriously underexposed to global stocks.
2) IOOF Holdings Limited (ASX: IOF) is a growth stock primarily due to its continuous bolt-on acquisition strategy. The most recent example is IOOF’s approach towards smaller rival SFG AUST FPO (ASX: SFW). While under many circumstances investors could be sceptical of a growth by acquisition strategy, IOOF has proven itself to create shareholder value through the process. The tailwind of compulsory superannuation contributions of course provides organic growth as well.
3) Ozforex Group Ltd (ASX: OFX) – The foreign exchange provider has grown net profit after tax (NPAT) from $13.2 million in FY 2011 to $17.1 million in FY 2013. According to its IPO prospectus, NPAT is forecast to grow to $18.6 million in the current financial year. Ozforex offers a valuable and trusted foreign exchange service at a fraction of the cost of the big banks. With more and more people looking to do business and travel across the globe, Oxforex is well positioned to ride this globalisation trend.