Is now the time to buy OzForex Group Ltd?

Is the plummeting price an opportunity to get set in this classy business?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published May 27, 2014 12:15 pm AEST

Shares in OzForex Group Ltd (ASX: OFX) have taken a 12% tumble today, thanks to the company reporting a 6.3% fall in full year net profit.

One-off costs from the aborted takeover of UK rival HiFX and IPO charges saw statutory net profit fall to $16 million, from $17.1 million in the previous year. Underlying net profit increased 25.8% to $20.8 million over the previous period.

From earnings per share of 6.8 cents, OzForex declared a fully franked dividend of 2.375 cents per share.

With no debt, OzForex's cash position (excluding client funds) increased from $31.2 million in 2013 to $41 million this year. Interestingly, OzForex is building a substantial float of customer funds, which it can earn income on for free – although it's unlikely to generate a significant portion of earnings.

CEO Neil Helm says the group is well positioned to meet its prospectus requirements and was increasingly focused on positioning OzForex for growth in a rapidly evolving industry. The company says there is increased competition in the money transfer industry but it remains fragmented. Mr Helm says OzForex is likely to make acquisitions as part of its growth strategy.

As an example of the industry consolidation, HiFX was eventually bought by US rival Euronet for £145 million. OzForex is up against companies like Euronet, Western Union, Xoom and MoneyGram, as well as potential disruptors like Facebook, Amazon and Google.

Currently trading on a P/E ratio of 32 times after the price fall, OzForex looks expensive, but certainly has plenty of potential if it can continue to generate double-digit growth. Companies on similar multiples include BigAir Limited (ASX: BGL), Technology One Limited (ASX: TNE), TPG Telecom Limited (ASX: TPM) and Carsales.com Limited (ASX: CRZ). It's probably no surprise that they are all tech/internet stocks…

A better bet than OzForex and the tech stocks?

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