Stockchase Opinions

Stockchase Insights Olympia Financial Group OLY-T BUY Mar 01, 2023

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research.

Business is certainly good. 
OLY has strong insider ownership, good growth in earnings, solid cash flow and a good balance sheet. 
Revenue rose 47% last year, with interest and trust income up more than 100%. 
Its small size adds risk, and no analysts cover it. 
But the dividend has doubled since 2017, it is cheap, and shares are up 53% in a year. 
It is hard to argue against it right now.  
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COMMENT
All you are going to get in the near term is the 6.9% yield. If you are comfortable with 6.9% and low prospects of it being raised, you are fine. There are better choices in the sector. His favourite is Carfinco Financial (CFN-T). (See Top Picks.)
COMMENT

A small trust company operation. Have done quite well in Calgary. Just declared a special dividend. If you buy this stock now, you are not going to get special dividends all the time and you are back into a relatively illiquid stock. The stock will probably go right back to where it was trading before, once the dividend is paid. If you buy you better be ready to hold it for a long time.

COMMENT

Very well run, kind of niche financial company. Very sharp management that knows how to make money. They paid a dividend, which may explain the drop in the share price. Not a huge growth business, but pays a regular dividend of around 7%. If you are looking for income, you are well served.

BUY

It is very ill-liquid so he hasn't bought it. However for a small retail investor it has great growth and good valuation along with a management team that has done well. Canadians have a wide array of larger cap financial stocks to choose from and tend to forget the small cap financials so it is good to find these specialty lenders. It is up 36% in a year.

BUY
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

Higher interest income would definitely be a tailwind for OLY’s business as interest income flows straight to the bottom line. For example, in FY2023 interest income grew 100%, and now accounts for around 50% of the company’s total revenue. In a low interest rates environment, the business may not do sensational, but would likely still be just fine. In the past 10 years, interest rates were quite low, but OLY’s operating results were still quite healthy and consistent. We may not consider OLY as a compounder as the company did not reinvest much of its earnings to grow, but we would certainly consider OLY as a high-quality, capital light business that would consistently raise dividends over time. We would be comfortable owning OLY over the long term.
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This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

TOP PICK
Stockchase Research Editor: Michael O’Reilly

After recently reporting a 69% increase in net income, we select OLY as a TOP PICK.  The Canadian based financial company trades at 11x earnings and supports a 79% ROE.  It has been prudently using some cash reserves to retire debt.  It pays a good dividend, backed by a payout ratio under 60% of cash flow.  We recommend setting a stop-loss at $83, looking to achieve $126 — upside potential of 22%.  Yield 5.7%

(Analysts’ price target is $126.64)
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This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

PAST TOP PICK
(A Top Pick Mar 21/24, Up 6.1%)Stockchase Research Editor: Michael O'Reilly

Our PAST TOP PICK with OLY is progressing well.  To remain disciplined, we recommend trailing up the stop (from $83) to $98 at this time. 

PARTIAL BUY
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

OLY’s earnings are quite sensitive to the movement of interest rates, with rates coming down, earnings could be under pressure in the near term. This sensitivity to interest rates is inherent and quite common among financial companies. In the near term, OLY’s earnings could face a headwind due to a decrease in rate and, therefore, limited prospect of significant dividend growth. That being said, OLY has done really well over the last interest rate cycle. Also, the company’s service revenue is more predictable. This is an inherent risk of investing in financial companies. OLY is a small cap and quite under the radar to most investors, but its management track record is really impressive, we like the name here and would be comfortable to hold over the long term.
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premium

This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

PAST TOP PICK
(A Top Pick Mar 21/24, Down 3.9%)Stockchase Research Editor: Michael O'Reilly

Our PAST TOP PICK with OLY has triggered its stop at $98.  To remain disciplined, we recommend covering the position at this time.