The alternative lending stocks on our list have P/E ratios that indicate good relative value
SmallCapPower | June 19, 2017: It has been a volatile year for Home Capital Group, as its stock price fell over 70%, reaching a low of $5.99 in April. Since then its shares have rallied 138% to $14.25. The drastic movement in Home Capital caused its peers to fall as well, thus lowering P/E multiples in the alternative lending sector. In light of this, we have identified five alternative lending stocks trading at low P/E multiples.
Home Capital Group Inc. (TSX: HCG) – $14.25
Banks
Home Capital Group Inc is a Canada-based holding company that operates through its subsidiary, Home Trust Company (Home Trust), which offers deposits, residential and non-residential commercial mortgage lending and consumer lending. It offers deposits through brokers and financial planners, and through its direct-to-consumer deposit brand, Oaken Financial. Home Trust, through its subsidiary, Home Bank, offers mortgage, deposit and personal banking products. Its mortgage lending includes Traditional Single-family and ACE Plus Lending; insured residential lending; residential commercial lending, and non-residential commercial lending. Its consumer lending includes credit card and line of credit lending, and other consumer retail lending.
- Market Cap: $877,638,182
- Total Revenue (LTM): $870,924,000
- Debt to Equity: 163.8%
- PE: 3.7x
VersaBank (TSX: VB) – $4.44
Banks
VersaBank, formerly Pacific & Western Bank of Canada (the Bank,) is a Canada-based chartered bank, which operates using an electronic branchless model. It sources deposits, consumer loans, commercial loans and leases electronically. The Bank also makes residential development and commercial mortgages as its sources through a network of brokers and direct contact with its lending staff. It operates through Banking segment. The Bank provides financing in the form of commercial and consumer loans, and lease receivables sourced through the Bank’s bulk purchase program. It also finances real estate developers in Southwestern Ontario and provides consumer lending through its private label credit card program.
- Market Cap: $93,951,466
- Total Revenue (LTM): $69,662,000
- Debt to Equity: 31.0%
- PE: 4.9x
Equitable Group Inc. (TSX: EQB) – $55.00
Consumer Lending
Equitable Group Inc. is a financial services business that operates through its wholly -owned subsidiary, Equitable Bank (the Bank). Equitable Bank serves retail and commercial customers across Canada with a range of savings solutions and mortgage lending products, offered under the Equitable Bank and EQ Bank brands. Equitable Bank provides mortgage loans to a range of customers that include business-for-self borrowers, newcomers to Canada and commercial real estate investors. The Bank also provides Canadians with various saving options that offer security and attractive interest rates, including Guaranteed Investment Certificates (GICs), High Interest Savings Accounts (HISAs) and deposit notes.
- Market Cap: $906,133,195
- Total Revenue (LTM): $637,465,000
- Debt to Equity: 817.7%
- PE: 5.9x
MCAN Mortgage Corp. (TSX: MKP) – $14.63
Banks
MCAN Mortgage Corporation (MCAN) is a Canada-based loan company and mortgage investment corporation. The Company’s primary objective is to generate income by investing its corporate funds in a portfolio of mortgages (including single-family residential, residential construction, non-residential construction and commercial loans), as well as other types of financial investments, loans and real estate investments. The Company’s primary subsidiary, Xceed Mortgage Corporation (Xceed), focuses on the origination and sale to MCAN and third party mortgage aggregators of residential first-charge mortgage products across Canada.
- Market Cap: $339,766,461
- Total Revenue (LTM): $106,198,000
- Debt to Equity: 323.6%
- PE: 7.9x
First National Financial Corp. (TSX: FN) – $26.00
Corporate Financial Services
First National Financial Corporation is a Canada-based parent company of First National Financial LP (FNFLP), which is an originator, underwriter and servicer of prime residential (single-family and multi-unit) and commercial mortgages. The Company operates through two segments: Residential (which includes single-family residential mortgages) and Commercial (which includes multi-unit residential and commercial mortgages). The Company provides mortgage-financing solutions to the mortgage market in Canada. The Company also invests in short-term mortgages, usually for six- to 18-month terms. The Company provides underwriting and fulfilment processing services to a mortgage originator using the mortgage broker distribution channel.
- Market Cap: $1,559,153,154
- Total Revenue (LTM): $1,049,818,000
- Debt to Equity: 5,640.2%
- PE: 8.0x
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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