Wayman Value Investing - New Stock Recommendation - November 2024
A new position is being added to the Wayman portfolio
# # # New Position # # #
Atlanticus Holdings (ATLC)
Recent Price: 43.86
Market Cap: 653.06M
P/FCF: 1.36
P/E: 9.96
P/S: 0.52
LT Debt/Eq: 4.30
Projected 4yr FCF: 2.72B
Wayman Portfolio Tier: Gather
Atlanticus Holdings (ATLC) is a financial technology company headquartered in Atlanta, Georgia that provides consumer credit and banking products. Founded in 1996 as a subprime credit card issuer, Atlanticus has evolved over the past two and a half decades to become a diversified fintech player offering a range of credit and banking services to underserved consumers.
From a value investing perspective, Atlanticus presents an intriguing opportunity. The company currently trades at just 6.2x trailing twelve-month earnings and 0.7x book value, despite delivering robust financial performance. Recently, Atlanticus reported a 26% year-over-year increase in revenue and a 35% jump in net income. Its return on equity stands at a healthy 19.6%.
What's most appealing about Atlanticus is the significant upside embedded in its valuation relative to its growth prospects. The company is capitalizing on favorable secular trends in consumer finance, including the growing demand for digital-first banking and credit products. Atlanticus' proprietary technology platform and data analytics capabilities give it a competitive edge in underwriting credit for subprime borrowers. As the company continues to scale its lending operations and diversify its product suite, I believe there is substantial room for further improvement in profitability.
Another factor supporting Atlanticus' valuation is its relatively low leverage. The company funds its lending activities primarily through securitization facilities, limiting its reliance on debt. This conservative approach to capitalization provides downside protection and flexibility to weather potential economic headwinds.
In summary, Atlanticus represents an attractive investment opportunity for value-oriented investors. The company's depressed valuation, strong financial performance, promising growth prospects, and prudent capital management make it a compelling idea in the current market environment.
Please keep in mind that while some investors might rely on market catalysts when considering what new positions to take, Wayman considers its style to be “catalyst-free investing.” Our reason for purchasing will always be based on our calculations which show a business is worth far more than where the market is pricing it. - Frank Memcaj, Founder of Wayman Value Investing