The Motley Fool

Down 5%: Here’s why the Collection House Ltd share price is falling

The Collection House Ltd (ASX: CLH) share price fell 5% today, following the release of its half-year profit report.

Here are the key takeaways from the debt collectors half-year to 31 December 2016:

  • Net profit fell 2% to $8.2 million
  • Revenue rose 2% to $66 million
  • A fully franked dividend of 3.9 cents per share was declared
  • Contracted Purchased Debt Ledger (PDL) acquisitions totalled $52.1 million

Collection House shares fell 10% in the month leading into today’s announcement, however, the result does not appear that bad.

The company’s Collection Services business reported strong revenue growth and flat profits. The division recently on-boarded Cash Converters International Ltd (ASX: CCV) as a client and won the contract for Transurban Group (ASX: TCL).

The PDL segment saw lower interest income. Collection House said the market remains competitive but it is showing signs of easing.

Looking ahead, the company expects to report profit between $19.4 million and $20 million over the full year. That would put its shares on a price-earnings ratio of around 8.5 times and a dividend yield of 6.3% fully franked if it declares a 3.9 cents per share dividend in the second half.

Should you buy Collection House?

Today’s profit result, while lower than that from the same period last year, appears decent. Until recently, I think Collection House was run only to profit its management in the short-term.

Right now, the company’s shares look cheap and potentially offer a handy dividend yield. However, I’m going to watch this one from the sidelines for a little while longer.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

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.

Related Articles...

Latest posts by Owen Raszkiewicz (see all)