Cityscape Financial (CTYS) has a 3-year CAGR of 440% and is selling at a 1997 PE of 4.5! EPS growth for 95-96 was 45% and estimated EPS growth, as per First Call, for Dec. 97 to Dec. 98 is 15%, which would yield a PEG of about .30 on a forward-looking basis.
This company writes mortgage loans in the U.S. and U.K. for bad credit risks, at very high interest rates. There has just been a small scandal in the British press about unscrupulous lending/foreclosure practices and the company has been forced to change some of its lending rules, such as abandoning the rule of 78's for prepayment of loans.
Caveat Emptor on this one. The business smells, one must view the financials with some scepticism, and the company may be driven out of business soon (although the UK business is not a large proportion of the sales). Obviously, people want the loans, but many people (me among them) tend to view management of these companies as potentially dishonest, due to the kind of business they run. And Mercury Finance is on everyone's mind who looks at this stock. Personally, I own some of this which I bought at 10, and it certainly fits the "low PEG" criterion. I think it's going to bounce up after a good earnings report. But it's risky, and even worse, the risk is hard to assess. |
