Is there anything to like about Thorn Group Limited? 

The boring, steady performance of Thorn Group Limited (ASX:TGA) may disguise a good value. 

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Thorn Group Limited (ASX: TGA) appears to be a boring, steady performer that never quite reaches the expectations of analysts. As a result, I suspect it tends to get overlooked.

Thorn Group operates in the household goods rental market in Australia. It provides a range of audio/visual products, white goods, computers and furniture through its Radio Rentals national store network. Thorn Group also provides financial services through Thorn Equipment Finance, Thorn Business Services, Cashfirst and National Credit Management Limited.

At various times over the last few years, Thorn Group has been heavily promoted as a company with great potential. As a result, there have been high expectations for both earnings and growth.

Thorn Group has not delivered the sort of returns that were predicted and has dropped off the radar as a result. Despite that, the business continues to chug along, paying a reasonable dividend of above 4%. Earnings growth has been flat as the business develops the financial services segment, but importantly free cash flow growth has been strong.

There is plenty to like about the business; in these uncertain times it operates in what should prove to be a defensive industry. It has a good business mixture with the Radio Rentals business and its financial services segment. This mixture provides a diverse exposure to both retail and corporate customers.

The recent highlighting of dodgy "payday" lenders by ASIC and the media has tarnished Thorn Group's reputation. While that has no doubt had a negative impact on the share price, the company doesn't appear to be a target of these investigations and there is nothing to suggest any wrongdoing on its part.

At current prices, the stock is not a screaming bargain, but it does offer an opportunity to invest in a solid business that has demonstrated the ability to develop and grow new segments. Thorn Group currently trades at a price-to-earnings ratio of 13.9, which is lower than the sector average.

Across the board it has attractive metrics. It boasts strong cash flow and an equity value-to-earnings ratio of 15.66, which is well below the market average of over 20. Debt is reasonable at about $40.5 million. Interest cover is a safe 19.3 and the operating margin of 33% is solid.

With companies like this, I find that looking at a range of measures of performance like this helps to inform me about the health and potential of the business. Thorn Group may well be a bit of a boring company, but when you scratch the surface there is plenty to suggest that they are worth considering adding to your portfolio.

Motley Fool contributor Rick Mooney has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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