Opinions
Jason Mann
ECN Capital
ECN-T
DON'T BUY
Jan 13, 2023
Stock price when the opinion was issued
You might be interested:
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The stock is still very cheap on all metrics. Considering growth perspectives, current book value and earnings power, it is attractively priced. It also has a strong record of dividend increases. Unlock Premium - Try 5i Free
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. They announced a special dividend of $7.50. The stock should have moved more on this news. Shares can be bought for the dividend here. Unlock Premium - Try 5i Free
We still think it is interesting as speculative buy but would not add. We have additional comments posted this morning.
Insiders own 9% directly and 14% via holding companies.
Through third parties, ECN originates prime and super-prime consumer loans for housing and RV purchases as well as for inventory financing and floorplan loans.
With concern on recession and higher interest rates, demand for such loans saw a significant drop in the quarter.
Unlock Premium - Try 5i Free
There is not really a lot to add. There has been no news in about a month. Some insiders were granted performance units but no significant buying (we would expect insiders are restricted while the review is ongoing). Typically, catalysts would be earnings and acquisitions. Earnings have been weak, and there may (or not) be acquisition discussions as part of the review. But likely not a lot of catalyst action before the review. Lower interest rates 'should' help sentiment a lot. Consumers (the end customer) remains in generally good shape, with high employment. We would be OK owning some at current levels. Expectations are very low here, but management has pulled rabbits out of hats before.
Unlock Premium - Try 5i Free
EPS $0.008; revenue $47.6M. We would like to hold at least until we rates decline, so we can see how the business/stock performs in a different rate environment.
Unlock Premium - Try 5i Free
EPS of 5c beat estimates of 4.3c; revenue of $66M beat estimates of $61M. New originations were $625.7M vs $571M last year. Guidance was afffirmed for 2024 but boosted for 2025 (19c to 25c vs 18c estimated). The company has streamlined its cost structure and is benefitting somewhat from lower rates. It was a good quarter. Still, we would rate it a HOLD for now after the move.
Unlock Premium - Try 5i Free
National Bank has made ECN a Top 2025 pick. The company has a high degree of leverage to interest rates and the economy. If rates decline and the economy holds up, it certainly could do well. Consensus calls for 75% growth in 2025. We think it can be owned, but it is a small company and higher risk.
Unlock Premium - Try 5i Free