Consumer credit supplier S&U (SUS) stands to benefit from the UK's booming car market and increasing household demand for credit. Yet its shares, rated at 12 times this year's forecast earnings, are at a discount both to the financial services sector and their historical average. That does not do justice to the cyclical growth potential.
IC TIP:
Buy
at
2070p
Tip style
Growth
Risk rating
High
Timescale
Long Term
Bull points
- Growing loan book
- Good debt quality
- Exposure to car market
- Applying for banking licence
Bear points
- Election dampened home credit
- UK's poor productivity could constrain growth
True, a trading update this month revealed that sales in S&U’s home-credit business, Loansathome4u, had been dampened by general election uncertainty. That sent the shares down a little, giving investors a decent point of entry, especially as analysts at S&U’s corporate broker, Arden Partners, reiterated their forecast for double-digit earnings growth this year.