If you're looking for a quality, growing, long term company to buy, put consumer finance company FlexiGroup Limited (ASX: FXL) at the top of your list.
The bear case for the company has been enthusiastically volleyed back and forth by investors for the last 12 months, but the case has time and again been defied by the company.
The current list of bear arguments goes a bit like this: the economy is slowing, unemployment is rising, China remains a big dark cloud over our heads and tumbling commodity prices have doomed any further major capital projects. The negative aura has pushed shares down 5.5% in the last 12 months.
These are all reasonable concerns, but unfortunately they ignore the real fact that FlexiGroup is studiously growing its revenue streams and increasing cash flows. Results for the first half of the 2015 (1H15) financial year were impressive with an 8% increase in earnings per share (eps) and 9% jump in the interim dividend (which comes fully franked) and a solid forward oulook.
Don't believe the hype
FlexiGroup's performance was largely thanks to growth in the company's Interest Free Cards and No Interest Ever business groups which show the divisions remain attractive propositions for consumers.
Meanwhile FlexiGroup is also focusing on expanding exposure to the strongly performing New Zealand economy. The company's New Zealand Leasing division grew cash net profit after tax (NPAT) by 23% in 1H15 and has been followed up with the recent acquisition of telecom rentals business TRL from Spark New Zealand Ltd (ASX: SPK). The acquisition is expected to add around $3 million to NPAT in the 2016 financial year, while full year 2015 NPAT is expected to grow by 7.6%.
Selling for a trailing price to (cash) earnings of just 12.5, and paying a dividend of almost 5%, FlexiGroup is the type of underappreciated achiever I love to own.
