Recently we released our new Investment Stock pick for this month for all our premium members and would like to share with you details on the same.
Our latest pick is basically an Asset finance company that has been performing reasonably well over the years. The company still has a small share in the overall market; though since the last few years it has attained aggressiveness and has been growing at around 20% + with growth accelerating in the last 2 years to around 24%. From being a regional player the company is now expanding on pan India basis.
The company’s margins have been expanding and are likely to expand further with change in funding mix and increase in proportion of high yield advances. At the same time the asset quality of the company has improved significantly in the last 4 years. Lastly, we find the valuations of the company reasonable on both absolute and relative basis.
Yes, we find the valuations of the company very reasonable and if the company is able to sustain its good performance, there’s good scope for re-rating and reduction in valuation gap with larger peers.
Wealth creation is a disciplined long term process. The more you delay, more you lose out on the crucial period of compounding your wealth. You have been missing out on several high quality and high yielding stocks of the past, but you can get your hands on latest stock pick by subscribing to either of Alpha or Alpha + before 15th Oct’16.
Few important points about the Latest Investment stock
As mentioned above the company is into asset financing business and is backed by very strong promoters with interests directly aligned with those of minority shareholders.
The company is gradually moving from being a regional player to a pan India player and has been expanding its branches aggressively since the last 4 years.
On the back of aggressive marketing exercise and expansion in number of branches the company’s loan book is recording 20% CAGR since the last few years with growth accelerating to around 24% in the last 2 financial years.
The financial operating metrics of the company are on an uptrend with Gross NPAs coming down, Return on equity improving to around 18%, cost of funds decreasing and interest spread increasing.
Company’s Capital adequacy ratio (CAR) is ~550 bps above the prescribed CAR level and we therefore believe company may not require equity infusion from the promoters or the other sources for the next few years and still record around 20% growth in loan book.
Our objective is to look for small/micro/mid cap companies with clean balance sheets (or balance sheets which are gradually improving), relatively easy to understand businesses, high promoter holding and good growth prospects and we believe that if our recently selected stock is able to sustain the growth momentum without major deterioration in asset quality there’s scope for expansion in valuations while on the earnings side the company can sustain ~20% growth rate.
You may have missed out on several high quality and high yielding stocks of the past, but you can get your hands on latest Investment stock by subscribing to either of Alpha or Alpha + before 15th Oct’16. Register yourself HERE
Note: This is not an investment advice. The performance data quoted at www.katalystwealth.com represents past performance and does not guarantee future results.