Outlook 2007 - Part III - Debt Collection (ASFI)
Today, I will discuss my second investment idea for 2007 - Financial Industry / Debt Sector.
Asta Funding (ASFI), a debt collection company with about 1/2 Billion market cap. In essence, its business is to buy consumer bad debt (including credit card, phone bill, utility bill, etc) pennies for a dollar, and via a series of efforts to get money back from the consumers.
Investment Theory:
Highlights
The company experienced steady/organic growth. Revenue went up from US$ 500M in 2004 to US$ 1B in 2006, while maintaing a 30% net profit margin. It maintained a moderate debt (about 100M), which is rarely seen is this capital intensive sector.
Peer Comparison
Superb management efficiency. With a total of 150 employees, a fraction of its peers at ECPG (>900), PRAA (1100) and FCFC (>200), its net income at 45M$ is the highest among the 4, while with the lowest P/E ratio at 10.
Current Price
Closed at $31.7, ASFI is at its 52week low ($28 - 42), with no concrete negative news. I evaluate this stock at $38 - $40, 20% higher than the current price. This stock has a buy now recommendation in this week.
P.S. Since my last post, ConocoPhilips (COP) drops from $74 to $63 with no other obvious reasons than oil price fluctuation. I wasn't fortunate enough to sell at high, and realize the profit. (my cost is $59). However I think here is the good price point to pick up some, if you haven't yet.
US consumers are generally under financial presure, and this plays a defensive hand if my overall economy prediction above turns to be true in 2007.The backdrop of this idea is US, the country as a whole, as well as its citizens will be facing unprecedented financial pressure. You can find some details from my early post.
Asta Funding (ASFI), a debt collection company with about 1/2 Billion market cap. In essence, its business is to buy consumer bad debt (including credit card, phone bill, utility bill, etc) pennies for a dollar, and via a series of efforts to get money back from the consumers.
Investment Theory:
Highlights
The company experienced steady/organic growth. Revenue went up from US$ 500M in 2004 to US$ 1B in 2006, while maintaing a 30% net profit margin. It maintained a moderate debt (about 100M), which is rarely seen is this capital intensive sector.
Peer Comparison
Superb management efficiency. With a total of 150 employees, a fraction of its peers at ECPG (>900), PRAA (1100) and FCFC (>200), its net income at 45M$ is the highest among the 4, while with the lowest P/E ratio at 10.
Current Price
Closed at $31.7, ASFI is at its 52week low ($28 - 42), with no concrete negative news. I evaluate this stock at $38 - $40, 20% higher than the current price. This stock has a buy now recommendation in this week.
P.S. Since my last post, ConocoPhilips (COP) drops from $74 to $63 with no other obvious reasons than oil price fluctuation. I wasn't fortunate enough to sell at high, and realize the profit. (my cost is $59). However I think here is the good price point to pick up some, if you haven't yet.
posted by Siyu LI at
3:15 PM
1 Comments:
Sam asked in the previous post:
What do you use to screen and come up with potential companies to invest in?
my stock ideas usually come from the following 3 sources.
1. User experience. the most convincing way for me to invest a stock is to know its services, product or brands that I know of.
2. Screen. I use Fidelity, Yahoo and AAII to generate some stock ideas.
3. Trusted Source. Stock pick from trusted friends or services.
RICK, for example, comes from one of my trusted friends.
By
Siyu LI, at January 15, 2007 3:56 PM
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