Nicholas Financial: Very Cheap Stock With A Catalyst, 60% Upside With Minimal Downside
- Stock down 27% since March 2014, primarily due to forced selling of an illiquid stock by risk arbitrage funds.
- Management just announced plans to enhance shareholder value via share repurchases, a tender offer, initiating a cash dividend and increasing financial leverage.
- Stock is very cheap: trading at 1x P/tangible book (13% ROE), 10x Price/10-year average EPS and 14% FCF yield. Comps trade at a P/tangible book range of 1.3x to 4.3x.
- High quality business: 13% ROE (7-year average, including 2008-09), positive EPS and FCF every year since 1996; grown tangible book value by 13.5% p.a. for the last 10 years.