Magnolia Capital, 10% owner of Nicholas Financial Inc. (NICK, Financial), purchased 206,603 shares of the company in 12 separate transactions in January.
According to the Securities and Exchange Commission, Magnolia Capital now owns 1,134,811 shares.
Nicholas Financial is a Canadian holding company that was incorporated in British Columbia in 1986. The company, through its subsidiaries, engages in acquiring and servicing contracts for purchases of new and used automobiles, light trucks, offers direct loans and sells consumer-finance related products to its customers.
The company has a market cap of $85.1 million, an enterprise value of $290.30 million, a price-earnings (P/E) ratio of 8.41 and a price-book (P/B) ratio of 0.79.
According to GuruFocus, Nicholas Financial has a 4 out of 10 financial strength rating with a cash-debt ratio of 0.02 and an equity-asset ratio of 0.33. The Piotroski F-Score of 6 indicates the company’s financial situation is typical for a stable company.
Nicholas Financial has an 8 out of 10 profitability and growth rating with an operating margin of 18.26%, a net margin of 11.28%, a return on equity (ROE) of 9.83%, three-year revenue growth of 20.60% and three-year EBITDA growth of 7.40%.
GuruFocus has detected three severe warning signs for Nicholas Financial that investors must pay attention to:
- The company’s Altman Z-score indicates the company is in the distress zone and could possibly file for bankruptcy within the next two years.
- The company’s operating margin has been in long-term decline at an average rate of -12.6% per year.
- The company continues to issue new long-term debt. Over the past three years, it has issued $78 million of new debt.
The company has some positive indicators as well:
- The company's revenue per share growth rate was 12.80% per year over the past five years.
- According to GuruFocus, Nicholas Financial has a 3.5-star predictability rating based on backtesting results. Stocks with a 3.5-star predictability rating produce, on average, a 9.3% yearly return over a 10-year sample size.
According to the Peter Lynch chart below, the company's stock is trading well below its intrinsic value.
Disclosure: Author does not own any shares of this company.
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