CCP - Credit Corp Group

[Value Hunter]

I do love the management but I see a lot of risk up ahead and feel it is fairly fully priced.

I am not buying at current levels as I am of the same opinion as Galumay however I continue to hold and think the stock is far from fully priced. If you look at their objectives they target a 16 - 18% return on equity with modest gearing on average over the long-run. To date it has achieved this objective on average with some years being a return on equity being in the mid 20s and other years return on equity being in the low double digits.

Return on equity is a bit below the 16% - 18% now but there is no reason it should not increase over time to be back in line with the target. A company generating 16 - 18% return on equity with a medium risk level and reinvesting half of its earnings (on average) at those incremental rates of return should be worth at least 2 times book value per share. Book value per share is somewhere around the $12 mark. Meaning intrinsic value per share should be at least $24 per share if your required rate of return is around 10% per annum. And I say $24 as a minimum. A case could be made for intrinsic value per share being higher.

 

[galumay]

Great articulation of your thinking @Value Hunter, not the way I think about valuation, but I am always happy to hear arguments in favour of higher valuations for my holdings!