Friday, 9 August 2013

Industrial Alliance Analyst Raises Carfinco Target Price

Shares Outstanding: 26.4 million

Shares Fully Diluted: 26.4 million

IA analyst Fred Westra, has increased his target price on the stock to $12 from $11.50 based on second quarter results that were released this week. Mr. Westra, who has been recommending Carfinco since it was in the $2 range, calls CFN a “phenomenal Company”.

Interestingly, he comments that it’s his belief that Carfinco is also on the trail of an acquisition.

We continue to believe that Carfinco is a phenomenal Company with sustainable 15-20% loan growth; one of the best efficiency ratios in the lending space; superior capital allocation with an ROE of 41.8%; solid risk management; and a 5.5% dividend yield (48.4% distributable cash payout). 
We made minor adjustments to our forecast, but our 2013 and 2014 EPS estimates remain unchanged at $0.91 and $1.08, respectively. However, as we roll our valuation forward, we increase our target price to $12.00 from $11.50 based on 12x EPSNTM of $0.99. The total expected return of 24.0% warrants a STRONG BUY rating. While CFN currently has sub-optimal leverage of 1.9x vs. historical average near 3.0x, we believe this is only interim to CFN finding an accretive acquisition target.

To read Mr. Westra’s update, click here.