The Australian economy is still crawling along, growing, but not going anywhere fast.
There are worrying signs with how much debt a lot of households have. Household debt to GDP stands at 206% according to the OECD.
This has been great for the banks, Afterpay Holdings Ltd (ASX: AFY) and other credit fuelled companies, but I don’t think we can become much more indebted without serious consequences.
One of the few industries that will probably grow in a debt overload is debt collectors.
Here are three companies that could be worth an investment:
Credit Corp Group Limited (ASX: CCP)
Credit Corp has a debt collection business in Australia and in the USA. This diversified approach could be the best way to go as it allows management to focus in whichever country it thinks offers the most growth in the near-term.
The share price has grown by 197% over the last five years and it could keep going higher over the next few years. It’s currently trading at 16x FY17’s estimated earnings with a grossed-up dividend yield of 4.37%.
Collection House Limited (ASX: CLH)
Collection House offers a range of debt collection services including its contract with the ATO.
Management didn’t have their eye on the ball over the last two years and let Credit Corp purchase a lot of debt ledgers. This impacts several future years’ profits and is the reason why Collection House shares haven’t fared so well recently.
However, it appears to have turned the corner and could be worth an investment for the huge grossed-up dividend yield that it has of 8.84%. It’s also trading fairly cheaply at 9.5x FY17’s estimated earnings.
Pioneer Credit Ltd (ASX: PNC)
Pioneer Credit debt collects for some of the largest businesses in Australia.
It has been achieving impressive growth over the last few years and I think it’s still trading at reasonable value.
It’s currently trading at 10.5x FY16’s earnings with a grossed-up dividend yield of 6.96%.
Although an economic slowdown wouldn’t be good for most of the share market, there are a few options that could still prosper.
At the current prices, I think my order of preference is Credit Corp, Collection House and finally Pioneer Credit.
These stocks could also keep growing strongly regardless of what the Australian or global economy does.
These 3 stocks could be the next big movers in 2020
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Motley Fool contributor Tristan Harrison owns shares of Collection House Limited. 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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