ACCORD Story

Accord Financial Group is a company out of Canada that provides short-term financing solutions to companies; They are a factoring company.  Accord will either lend to a company against their receivables or buy the accounts receivables from a company to provide them funding so that they can carry over their business.  The business model has been working for some time and the revenue is expanding.  Along with added revenue, the company has been able to increase its earnings over the years as well.

Accord works on a spread basis, lending a certain amount of money versus the receivables with the expectation that the receivables will be paid in a timely enough manner that what Accord lends out versus what they take in and be paid the difference between.  It is a tricky business, but can be very lucrative.  Accord has done a solid job of creating income from this business model, as the net income and earnings per share show below:

2011:    $7.60  $0.85  

2012:    $6.40  $0.76  

2013:    $6.50  $0.80  

2014:    $6.90  $0.83  

2015:    $8.80  $1.05  

First, the current stock price is trading at just below $9.00 per share.  That puts the $1.05 per share earnings a really great opportunity for someone looking for a low ratio.  The stock market is not exactly selling that opportunity across the board.  The average ratio is sitting about 25 for price-to-earnings; an ultra-high level.  There are not too many other opportunities out there at this kind of ratio.  

So, a potential investor could buy into this stock and earn a 8.6% earnings per share ratio.  That turns into an 11.5% investment return.  Plus, there is the added benefit of increasing earnings and increasing revenue.  This translates into an ever-growing potential for more earnings.  There is momentum here.  It will feed on itself as the economy continues to expand.  

The business model that Accord work under, borrowing the funds to buy the accounts receivables, then earn the spread in between, allowing Accord to build up a trust base with its investors.  As interest rates move higher, as they have been doing over the past several months, the spread that Accord earns will increase even more allowing Accord to increase its revenue.  Accord is well positioned in this regards as it builds up its network of companies it works with, and investors that provide the cash to do business.  

With increased earnings potential via the spread differential, and increasing earnings from the company’s already growing business model, Accord should be trading at a much higher variable.  However, this is a Canadian company.  It is susceptible to currency fluctuations in its earnings.  But, the U.S. dollar has been depreciating as of late.  This will add in the variable of increasing earnings from the currency exposure.  Fro some time the USD has been pushing to highs not seen in many years.  This trend has been reversing and looks set to continue.  

There are many reasons why picking up Accord for your portfolio is a smart move.  The EPS ratio si the standout.  But, the added benefit of an expanding economy, which will drive the differential profit potential in favor of added earnings, as well as the currency movements that will bring in protection from fluctuations in the value of the Canadian dollar make Accord a strong buy.  The momentum is already there and it is gaining even more steam.  

This is one company whose stock will make it into my long term holdings, and it should do the same for you as well.