Home Capital Group Inc (TSX:HCG) Posts a Strong Q2: Is it Time to Give the Stock Another Chance?
Home Capital Group Inc (TSX:HCG) has been on a long road to recovery since its collapse a year ago, and still has a long ways to go. On Monday, the company announced its second-quarter results, which although were an improvement over last year’s abysmal performance, still fell short of analyst expectations.
The company had the benefit this quarter of going up against softer numbers, as a a year ago the lending company posted a net loss of over $111 million. This year, Home Capital was able to net a profit of $29.6 million on sales of $101.6 million, for a very strong profit margin of nearly 30%.
Cash flow was also strong for the quarter, as Home Capital generated over $423 million in cash from its operating activities as it was able to build on its cash holdings.
Now that the horrible Q2 from last year is five quarters out, Home Capital can once again have a positive earnings per share in the trailing twelve months. With per-share earnings of around $1.57, Home Capital is now trading at a positive price-to-earnings ratio of less than 10 and it is still well below book value, at a price-to-book multiple of less than 0.7.
At these multiples, Home Capital offers investors a lot of value for their money, and it could be a great pickup for a stock that has looked to have turned a corner. With the company no longer making headlines and staying out of the press, the only challenges now in its way are generating new mortgages in a rising interest rate environment.
Year to date the stock is down more than 12%, but over the past 12 months it has risen by 16%. While investors may still be hesitant to push the buy button on Home Capital, it could prove to be a great long-term buy for those that do.