Data analytics business Veda Group Ltd's (ASX: VED) shares have tumbled more than 20% since peaking at $2.55 late in March, with the stock now trading at just $2.03. In the same time, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has climbed 0.9%.
Although most investors seem to be deterred by Veda's strong downwards momentum and relatively high P/E ratio of 26.3, I actually took the opportunity to buy shares in the data analytics group just last week!
Here are five reasons why you should look beyond the stock's recent performance and consider adding Veda to your portfolio today.
- The Global Financial Crisis reminded us just how important it is to only lend to customers who are able to repay their debts. Stricter credit reporting standards will soon be introduced and Veda is in a prime position to benefit as its products allow businesses to assess their potential customers' credit and fraud risks.
- Incredibly, the company has delivered revenue growth every year since FY1993 and at a compound annual growth rate of 14.6%!
- Veda is highly protected from new competition. For starters, Veda already dominates a large portion of the market – it maintains records on 20 million people and 5.7 million businesses – while attempting to replicate Veda's business would also be extremely costly (both upfront and ongoing).
- Although the P/E ratio might seem high, it is actually quite reasonable considering the company's strong track record for increasing earnings. Some estimates right now suggest EPS could increase by more than 15% between 2014 and 2015.
- While the company does not yet offer a dividend, it intends to initiate a payout ratio of between 40% and 60% in the coming years. It is expected to begin at 2 cents per share while some forecasts suggest that could climb to 5.3 cps by 2016, which would give it a yield of 2.6%.
An even better ASX growth stock…
I took the opportunity to buy shares in Veda Group just last week. Although the stock has dropped marginally below my buy price, I am very confident in the business' long-term prospects.
However, there is another company that I already own that I am perhaps even more bullish on. Its shares have also fallen in price lately and, given its excellent long-term growth potential and fantastic fully franked dividend yield, I can't help but think I should be buying more…
