Shareholders in Australia's leading personal injury law firm Slater & Gordon Limited (ASX: SGH) enjoyed a stellar run throughout 2014 but by all accounts 2015 looks to be more of the same.
Indeed since listing in 2007 Slaters earnings per share (EPS) have more than doubled and its share price is up over 280%, but in the coming five years analysts are tipping EPS will continue growing rapidly.
Just this week, Morgans upped its price target on Slater to $7.31 per share, at current prices that represents 14% upside. But they're not alone. Last month CLSA also increased its price target on the lawyers to $7.22 per share.
Just like fellow legal eagles, Shine Corporate Ltd (ASX: SHJ) and IMF Bentham Ltd (ASX: IMF), Slater has many ways to grow.
Here're three reasons why Slater should be in your long-term portfolio.
- It's Australia's leading personal law firm. The Australian PI (personal injury) market is dominated by Slater, Shine and Maurice Blackburn. With around 25% market share, Slater may be 'ex-growth' in PI but its entrenched reputation affords it a defensive earnings base, which is independent of the direction of the economy. It'll continue to experience growth in PI, but it's likely to be slower than in previous years.
- General Law will fuel domestic growth. Slater is busy building its presence in General Law throughout Australia. This will build scale for the company and provide top line growth well into the medium-term.
- The UK expansion. Slater is growing acquisitively in the UK and establishing itself a premier law firm in multi-track cases. It has an estimated 5% market share (2% behind its largest rival) and the opportunities for consolidation are significant. To put it in perspective, from this small market share it expects to derive 45% of group revenues in 2015.
I'm already well up on my investment in all three of these legal eagles. However, at today's price of $6.40, Slater & Gordon is a good long-term buy in my opinion. Whilst its 1.4% dividend might not seem like much now, after five years of growth, I expect its payout will become meaningfully larger.
