What is you insight on PRL-T? Is it a good and better risk and reward pick after it fall from the highs of C$42? Is there major problem with its business? Will it recover or its better to go with other lenders such as Banks? What basically I mean was that its business prospects are same? The current pull back in price is not because a group of investor entered in the stock to take it to highs. They got what they wanted and left.
Thanks
Piyush
PRL is a relatively new public company that hit the ground running, grew quickly, raised its dividend fast and saw its stock soar. It was then hit with fears of higher rates and a recession, and many investors had big embedded profits and decided to sell before sticking around to see how it fared in a recession, which the the public company and investors have yet to experience. But its business prospects haven't changed. It raised its dividend again recently, and EPS is still expected to more than double this year and rise 45%+ next year (based on consensus estimates). Valuation has gone from 15X earnings to 8X, which, granted, is more in line with peers. Valuation did have a sector premium in the upswing. Yield is now 2.47%. Revenue rose 35% last quarter. Some can argue that business will actually pick up in a recession. It can, as long as the company is disciplined with pricing so losses do not increase. So far, it has shown good ability here. We do not think there is a 'problem' here. It is just a small company in a bad market and was easy for investors to take profits. Also, there is always government risk in the sector (interest rates were capped this year). But, we think the risk/reward scenario looks significantly better these days.