Is the fall in the FSA Group Ltd share price a buying opportunity?

FSA Group Ltd (ASX:FSA) suffered from profit taking despite posting better-than-expected interim results. But the share price weakness may not last long as the company's fundamentals suggest further upside for the stock.

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A profit beat wasn't enough to save FSA Group Ltd (ASX: FSA) from a bout of profit taking with shares in Australia's largest consumer debt agreement provider falling to a one-week low during lunch time trade.

Management reported a 10.4% uplift in group revenue to $34.4 million and an 18.5% jump in net profit to $7 million for the six months to end December.

This was ahead of the group's December guidance of up to a 17% growth in net profit.

However, it was a case of "buy the rumor and sell the fact" with shares in FSA falling 2.3%, or 3 cents, to $1.26 during lunch time trade.

The dip is not surprising given that the stock has surged nearly 30% since the profit guidance until yesterday.

However, I suspect the stock will resume its upward climb as its fundamentals look attractive even when compared to its peer, Collection House Limited (ASX: CLH), which also reported a strong result earlier this month.

Assuming similar growth momentum in the second half, FSA is trading on a 2014-15 price-earnings (P/E) multiple of about 10-11 times, when consensus estimates for Collection House puts it on a P/E of nearly 14 times.

Further, the yield for FSA should come in at around 5.5% (this assumes a 1 cent increase to last year's dividend of 6 cents a share), when Collection House is paying a forecast dividend that's closer to 4% for the current financial year.

The outlook for the business looks encouraging as high levels of consumer debt should drive demand for FSA's debt agreement service.

Besides offering services to consumers wishing to enter into a repayment agreement with creditors, FSA also provides small business lending solutions. This business has also reported growth with the loan pool increasing to $29 million at end of 2014, compared with $24 million at June last year.

While business lending only contributed 17% to group net profit in the first half, the expansion of this business is key to growing group profits above average rates.

This is why the upcoming renewal of FSA's loan facility with Westpac Banking Corp (ASX: WBC) will be keenly watched by the market. The facility is used to fund FSA's business lending and is due to mature in June this year.

Management is expecting the facility to be renewed on similar terms for another two years.

Motley Fool contributor Brendon Lau does not own shares mentioned in this article.

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