I have always touted the value of reading as an investor. Not only do you start to connect the dots in different ways, but it’s also a good way to identify interesting investment opportunities.
Although I have known for a long time Financial medallion MFIN, this week Barron brought to my attention the significant drop the stock has suffered in recent months. The bottom line is a company that trades at 40% of its book value, less than 4 times earnings, and if analysts are right, less than 6 times earnings eventually. These numbers alone make any business worthy of a deeper dive for any bargain-hunting investor.
If you want to use one word to describe why the market has deteriorated in Medallion, that word would be Uber. Medallion is known to be the company that would fund and purchase the cab medallions that New York City cab drivers needed to have in order to operate. Since Uber’s arrival, the taxi business has been crushed.
Yet Medallion clearly positions itself as much more than a medallion taxi lender. In fact, only 10% of income comes from taxi medallions. The rest comes from consumer credits (80%) while trade credits and investments represent the remaining 10%.
Medallion has a long history of mezzanine type financing. Of course, this loan tranche carries more risk and adds complexity for investors trying to analyze the business. Medallion Financial operates in four segments: Medallion Lending, Mezzanine Lending, Asset-Based Lending and Medallion Bank.
It’s a very interesting collection of companies, and the current price makes the company a very intriguing idea in today’s market environment. The company until recently paid a quarterly dividend of $ 0.25 per share, but reduced the payout to a nickel. Yet at the current share price rate, the return translates to 5%. The reduction has been cited as a way to transfer capital to growth opportunities and, with management holding 15%, there is some comfort there. Even though delinquencies on medallion loans have increased, these problems do not seem to justify the current stock price of just above $ 4.
With a market cap of less than $ 100 million, equity capital of $ 277 million, and $ 1.7 billion in assets, Medallion deserves a very close look.
Please note that due to factors such as low market capitalization and / or insufficient public float, we consider MFIN to be a small cap stock. You should be aware that these stocks are subject to more risk than stocks of large companies, including greater volatility, lower liquidity and less publicly available information, and that publications like this may have an effect on their stock prices.
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