Shares of Veda Group Ltd (ASX: VED) skyrocketed nearly 37% between July and September this year as investors started to recognise the business' true potential. While they soared as high as $2.51 late last month, they have since retreated to just $2.35 in line with the broader market sell-off.
Veda is one of Australia's leading data analytics businesses which empowers companies across Australia and New Zealand by providing them with in depth credit information and analysis on potential customers.
Here are three reasons why I like the company so much…
1) Safety. Given the nature of the business, Veda Group is actually an excellent stock to hold through times of economic uncertainty. This was highlighted even through the GFC where Veda still managed to grow revenue strongly. That's because when companies become uncertain, they pay even greater attention to the strength of their balance sheet, which means they want to make sure they are only extending credit to customers who can repay their dues. As a result, demand for Veda's products tends to jump.
2) Track Record. You can have confidence your money is safe in Veda's hands thanks to its strong track record for growing earnings and revenues. In its most recent year, it managed to grow EBITDA and revenues by 21.7% and 12.4% respectively.
3) Growth. Perhaps the most exciting growth opportunity for Veda right now is the introduction of Comprehensive Credit Reporting, which will allow Veda to provide even greater details on the credit histories of individuals and businesses to its customers. Commenting on its growth recently, Veda's CEO Nerida Caesar said she expects "at least double digit EBITDA growth in FY2015 and broadly commensurate growth in NPAT."
Buy, hold, or sell?
Many investors would be deterred by Veda's valuation which has it currently trading on a P/E ratio of roughly 33.6x. Although the stock isn't necessarily in bargain territory, I would suggest its impressive track record and strong growth prospects still have it trading in the 'buy zone' right now.
