The ASX has continued to hold its stellar run and is set to reach new heights given the fact that improving economic conditions and historically low cash rates have diverted attention away from term deposits and into the lucrative equity market.
Legal eagle Shine Corporate Ltd (ASX: SHJ) is an Australian litigation company holding significant interests in the profitable personal injury market.
Since its humble beginnings as a listed company in 2013 I've been considering buying a stake in the company and I'm kicking myself now for not going in sooner, given the share price has strengthened approximately 36% since that time. However, last week I finally decided to grab a share of the company. Here are three reasons why I've decided to start buying and why you should consider it to.
1. Expansion through acquisitions
The ability for a company to drive its future earnings is contingent upon its ability to explore new markets and diversify geographically. Shine has recently been looking to achieve just that by moving away from its native ground in Queensland (accounting for 59% of revenues) to other states like Western Australia, where no regulatory hurdles exist in the personal injury sector.
Its recent acquisition of Queensland-based Emanate Legal and Stephen Browne personal injury lawyers in Western Australia, sets Shine up for some quality acquisitive growth, complementing its existing organic growth.
2. Insider ownership
A significant chunk of Shine's ownership is held by insiders. This always entices me because insiders are much more involved in the day-to-day operations of Shine and are therefore aware of vital information regarding the company's future performance. Although tight ownership may have the downside of making its shares illiquid for retail investors like us, it doesn't matter that much since Shine is a stock to hold for the long run.
3. Valuation
Shine's cheap valuation was one of its most attractive features. Despite recent gains, its low price-to-earnings ratio of 15.9 and price-to-earnings growth (PEG) ratio of 0.93 signals a relatively undervalued stock, given double-digit growth forecasts by analysts.
Furthermore, despite requiring an upfront cash payment of $23.5 million for its two most recent acquisitions, Shine retains an extremely healthy balance sheet, giving it plenty more headroom for further acquisitions.
I think Shine's valuation is just the icing on the cake and if you're looking for a company with plenty of long-term growth potential, Shine could be the perfect fit for you.
