Magnolia Capital, 10% owner of Nicholas Financial Inc. (NICK, Financial), has purchased 73,765 shares of the company so far in February, according to filings with the SEC.
Following the purchases, Magnolia Capital now owns 1,208,576 shares of the company.
Nicholas Financial has a market cap of $85.3 million, a price-earnings (P/E) ratio of 9.5, an enterprise value of $295.9 million and a price-book (P/B) ratio of 0.8.
Nicholas Financial is a Canadian holding company that was incorporated in 1986. The company engages in acquiring and servicing contracts for purchases of new and used automobiles and light trucks, and offers direct loans and sells consumer-finance related products to its customers.
According to GuruFocus, Nicholas Financial has an 8 out of 10 financial strength rating with a cash-debt ratio of 0.02 and an equity-asset ratio of 0.33. The Beneish M-score of -1.41 indicates the company is a manipulator of its financial statements.
Nicholas Financial has an 8 out of 10 profitability and growth rating. It has an operating margin of 16.4%, a net margin of 10.13%, a return on equity (ROE) of 8.51%, three-year revenue growth of 20.6% and three-year EBITDA growth of 7.4%.
Nicholas Financial has several good indicators that make it attractive:
- The company has reported predictable revenue and earnings growth at a rate of 20.6% per year over the previous three years.
- According to the  discounted cash flow model, the stock is trading below its fair value of $15.33 at $10.96. This provides investors with an estimated 29% margin of safety if they were going to invest in the company today.
- Nicholas Financial has 3.5-star predictability rating. According to Gurufocus, based on backtesting results, stocks with a 3.5-star predictability rating produce, on average, a 9.3% yearly return over a 10-year period.
The Peter Lynch chart below shows the stock is trading below its fair value.
Disclosure: Author does not own any shares of this company.
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