I recently took advantage of Veda Group Ltd's (ASX: VED) form slump, picking up shares in the data analytics company at around $2.09 apiece. As it turns out, I could have bought the stock even cheaper (it has since traded as low as $1.955), but I'm happy with the price I paid as I believe it will be a real winner for my portfolio in the long run.
Currently priced at $1.99, the stock is trading on a P/E ratio of 23 – which is higher than the average S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) stock – so I can see why investors might be a little reluctant to buy. However, I believe a look at the company's historical performance could more than justify its valuation.
To begin with, Veda Group has managed to deliver revenue growth in every single year since FY1993. Even more unbelievable is that that growth has been at a compounded annual rate of 14.6%! Veda has also managed to grow EBITDA at a compounded annual rate of 17.3% between FY2011 and FY2013, while some estimates suggest earnings per share (EPS) will grow by more than 15% between 2014 and 2015.
Although Veda Group shares might not be a screaming bargain, the company has an impressive past and a very promising future. Credit reporting standards will continue to become stricter in the coming years and while Veda commands a market-leading position, it remains heavily protected from new competition.
An even BETTER bet than Veda Group Ltd
While I would obviously prefer Veda's shares to climb higher and never look back at these levels, I would also be tempted to increase my stake should the share price fall even further.
