The average target price of LFS.AX is 1.3 and suggests 14% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 1.3. This translates into 15% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 1.3. This suggests 10% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

Latitude Group Holdings Limited operates in instalments and lending business in Australia and New Zealand. It provides various installment products to support customers, the merchants, and other commercial partners. The company also offers lending products comprising credit cards, personal loans, and motor loans through commercial partners, as well as various channels, such as direct, online, and by phone. In addition, it provides debt consolidation, home renovation, and travel loans, as well as insurance services. The company was incorporated in 2015 and is based in Docklands, Australia. Latitude Group Holdings Limited operates as a subsidiary of KVD Singapore Pte. Ltd.

Australia

Latitude Group Holdings Limited

Financial Services

The company pays dividends from time to time. It has paid dividends in less than half the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been good and slightly above its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends annually. 

LFS.AX reported revenue of AUD 477mn in the last 12 months, down 52% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. Market expects EPS to reach AUD 0.06 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 2ppts over six months and grown 9ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 102.1% in the last 12 months, a decline from 108.8% in FY23. 

Historically, LFS.AX has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 4.5%, a growth from -38.9% in FY22. 

In the last 12 months, the return on capital employed (RoCE) grew to 0.3%, below the peers. The consensus estimate for FY24 for RoCE is 28.3%, again behind the peers. 

Latitude Group Holdings Limited reported a return on equity (RoE) of 1.8% in the last 12 months, up from 1.6% in FY23. The market consensus projects an RoE of 5.5% in FY24, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to 0.3% in the last 12 months, an increase from 0.3% in FY23. The market analysts predict that RoA will be 1.1% in FY24, again weaker than its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.0 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

LFS.AX has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is unstable and becomes extremely unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is very high. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, negligible return on capital, excessive margin volatility, weak debt servicing capacity, inadequate interest coverage, poor cash flow generation, and an unfavourable capital structure.

In highly turbulent market conditions, LFS.AX is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, LFS.AX is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. Specifically, the stock is fairly valued on P/E, neutral on EV/EBITDA, overpriced on P/FCF. 

Latitude Group Holdings Limited

A$ 1.13

3

Latitude Group Holdings Limited

A$ 1.13

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

A$ 1.13

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