A Look at Three Financial Stocks with PE below 15x – RMC, NGI and MYS

  • November 22, 2019 07:53 PM AEDT
  • Team Kalkine
A Look at Three Financial Stocks with PE below 15x – RMC, NGI and MYS

As the selection of an appropriate stock for investment requires a lot of time and energy, investors can make use of some relevant tools that help in stock selection. One of such widely used and effective tools is the price-earnings or P/E ratio, which is calculated by dividing the stock’s current market price by its earning per share (EPS). This ratio gives an idea to the investor about the growth potential of a particular stock.

Lower P/E versus High P/E

A stock with a high P/E suggests that the investors are paying a higher price for the share relative to its earnings, while a lower P/E indicates that one is getting more earnings from the particular stock for the investment made.

A high P/E means that investors are willing to pay a higher price of the stock as they believe that the company has good growth prospects. On the other hand, though a low P/E makes a stock a good value, it can simply suggest that investors are not very confident about the prospects of the company.

However, the low P/E ratio does not confirm that the company’s earnings will fall in the future. So, an investor should also study the other aspects of the company before making an investment decision. Considering this, let us discuss three financial stocks with a low P/E ratio (below 15x) listed on the ASX:Lower P/E versus High P/E

Resimac Announced Trading Update for 1H20

The leading multi-channel distribution business and non-bank residential mortgage lender, Resimac Group Limited (ASX: RMC) has recently released its trading update for the first half of financial year ended 2020.

Resimac expects its Normalised NPAT to be in the range of $24 million to $27 million in 1H20, that reflects lower 1st quarter funding costs propelled by the relatively low spreads between the Australian central bank’s cash rate and 30-day Bank Bill Swap Rate (BBSW) and continued strong Assets Under Management (AUM) growth.

The principally funded AUM of the company was at $10.9 billion as on 31st October 2019.

The company assumes spreads between 30-day BBSW and RBA cash rate to remain broadly in line with current levels and expects its NPAT of 2H20 to be lower than that of 1H20. In addition, the company anticipates a continuation of uncertainty about the central bank’s monetary policy and interest rates in 2020.

The company achieved strong financial results during the period ended 30th June 2019:

NPAT: The company’s Statutory and Normalised NPAT increased by 86 per cent and 19 per cent to $47.2 million and $31.1 million, respectively during the period.

Net Interest Income: Resimac’s net interest income rose 15 per cent to $117.9 million during the period, driven by stable funding costs, 19 per cent principally funded AUM growth and normalising BBSW from the December/January peak.

Dividend: The company announced a total dividend of 1.5 cents per share for FY19, comprising fully franked final dividend of 1 cent and a one-off special dividend of 0.5 cents per share.

RMC closed the trading session higher on 22nd November 2019 at $1.240, with a rise of 9.7 per cent relative to the last closed price. The stock has generated a return of 189.4 per cent in the last ten years.

Navigator Released Earnings Guidance for FY20

Navigator Global Investment Limited (ASX: NGI) is a parent of US-based Lighthouse Investment Partners, LLC that manages and creates global hedge fund solutions for multiple clients across the world.

Navigator has released its FY20 earnings guidance after taking into account known subscriptions and redemptions for the December 2019 quarter, year-to-date actual results to 31 October 2019 and the impacts of cost rationalisation. The company expects to attain an EBITDA of about $33.5 million in FY20.

The company notified that its full year result would be materially consistent with the EBITDA achieved in the second half of the previous financial year - $17.6 million.

Navigator reported the following financial results for the period ended 30th June 2019:

Closing AUM: The company recorded closing AUM of $14.2 billion at 30th June, which was 15 per cent lower than the FY18 figure of 16.7 billion.

Management fee revenue: The management fee revenue was 40 per cent up on the prior year, at $105.4 million, driven by an increase in average total AUM, primarily from the Customised Solutions business.

EBITDA: The company earned a record EBITDA of $37.7 million that was 10 per cent up on the prior year. As per the company, its EBITDA was largely consistent with the cash flow which was generated from its operating activities, and which was available to pay dividends to shareholders.

Dividend: The total dividends per share of the company was at 17 cents per share, 6 per cent higher than the total dividend of 16 cents per share in FY18. The FY2019 combined interim and final dividends equated to a pay-out ratio of 73 per cent of EBITDA.

Navigator Released Earnings Guidance for FY20

Source: Company’s Presentation (8th August 2019)

NGI ended the day’s trading at $2.65 on 22nd November 2019, down by 5.7 per cent relative to the previous closed price. The stock has delivered a 10-year return of 163.5 per cent.

MyState Delivered Decent Performance in FY19

The non-operating holding company of a diversified financial services group, MyState Limited (ASX: MYS) is a leading provider of wealth management, banking and trustee services to customers around the country via its retail brands - Tasmanian Perpetual Trustees and MyState Bank.

The company recently notified that its Non-Executive Director, Mr Stephen Lonie, passed away after a short illness.

The company reported the following financial results for the period ended 30th June 2019:

NPAT: The company recorded a decline of 1.5 per cent in its Statutory NPAT to $31 million in FY19. Excluding the effect of its discontinued operations, its NPAT fell from $31.3 million to $29.8 million.

Dividend: The directors of the company declared a fully franked final dividend of 14.5 cents per share, payable on 1st October 2019 to shareholders on the register at the record date of 30th August 2019. Previously, for the year ended 30th June 2018, the company paid a fully franked final dividend of 14.5 cents per share, amounting to $13.097 million.

Cost-to-Income Ratio: The company’s cost-to-income ratio increased from 62.7 per cent to 64.8 per cent, adversely impacted by growth in technology related costs and reduced income related to movements in BBSW linked funding costs.

MYS ended the day’s trade flat at $4.79 on 22nd November 2019. The stock has delivered a return of 71.7 per cent in the last ten years.

It is worth noting that all these financial stocks that have low P/E ratio have delivered significant returns in the last ten years. However, it should be kept in mind that though P/E ratio is an important indicator of company’s performance, an investor should do a proper research before buying or selling a stock on the basis of a single factor.


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