Financial companies may be the story of the year and this stock may be one that has been left behind. This is a car loan and credit card origination and maintenance company. As interest rates move higher around the nation this company will be able to earn more through its loan portfolio that it maintains.
Atlanticus Holdings is a financial services company that deals in both car loans and credit cards. They originate these loans and then provide servicing for customers.
I have been very bullish on the financial sector of the stock market. Our economy in the United States is growing and expanding. Because of this, the Fed is raising interest rates. With higher interest rates ATLC will be able to earn more from its loan portfolio. That translates into a larger bottom line without even having to grow its customer base. As interest rates increase, the loans that ATLC has on its book will get their interest rates increased.
At this time ATLC has been increasing its assets over the past few years. Here is a look at the asset totals that the company has in its portfolios along with its debt, respectively:
2012: $380,426 / $361,239
2013: $352,235 / $351,077
2014: $268,355 / $260,913
2015: $280,729 / $269,778
Both total assets and total debt saw a drop in 2014 from the year previous. The world economies were pulling back hard and the United States economy was far from immune to that. Since then the company has been improving its assets, or its loan portfolio. This upward trend was met with debts increasing simultaneously, however, at a slower pace. That is positive for the company. Given the current levels of its assets, increases in interest rates will translate into increases in revenue and earnings per share. Here are the two aforementioned, respectively:
2012: $156,016 / $1.27
2013: $138,630 / ($1.29)
2014: $167,416 / $0.51
2015: $128,103 / $0.12
During the year 2015 total revenue declined from the previous year. However, 2016 numbers are improved, although the financial world is awaiting the final numbers for the year. In the meantime, the EPS is expected to push towards $0.25 per share for the year. Right now, the stock is trading at $2.25 per share. That would put this stock in line with my minimum criteria of 10-times earnings. However, it is my belief that if the earnings came in at that level the stock would trade up quickly and stay there for a long time. The timing on this stock is immediate in consideration of its earnings release coming up shortly the middle of next month.
Regardless of where the earnings come in for the last quarter of last year, I am continually bullish on the industry. I mentioned that interest rates are heading higher. That means revenue for this company and it does not even need to lift a finger to get that new revenue. We have all seen adjustments to our credit cards with the interest that we pay. This company’s customers, along with other financial companies in the sector, are going to do the exact same across two board. The balances on customer’s credit cards are not likely to change. But, the makeup of the payments will. Their interest rate will increase and the amount that gets applied to the overall balance goes down. Again, more revenue to the company.
As the economy in the United States continues to expand at the rate that it has been expanding, the Federal Reserve is going to have to continue to increase interest rates. That increase will affect financial companies such as ATLC. They will pass that interest rate down to their credit card holders. And, the bottom line will continue to expand for this company.
You would do well to get into a company with expanding fundamentals such as these. And, with the company’s earnings report just around the corner, you would do well to get involved in this company soon.
|This media report from Macroaxis distributed on January 31, 2017 was a factor to the next trading day price decrease.The overall trading delta against the next closing price was 3.79% . The overall trading delta when the story was published against the current closing price is 21.94% .|