Legal services provider Shine Corporate Ltd (ASX: SHJ) has reported a 29% jump in revenue to $73.1 million and a 24% increase in normalised net profit after tax (NPAT) to $14.1 million for the half year ending 31 December 2014. On a per share basis, normalised earnings per share increased 14% to 8.24 cents per share (cps) with the dividend also up 14% to 2 cps.
The strong interim results were thanks to contributions from both organic growth and acquisitive growth. Another highlight from the half was the performance of the Emerging Practice Litigation division which recorded growth in revenue of 68% to $14.6 million.
Management appeared happy with the progress of the group, which is approaching two years since it listed on the ASX. Looking to the full year, management provided guidance for earnings before interest, tax, depreciation and amortisation of between $42.5 million and $47 million.
The company certainly appears to be well positioned to consolidate the industry where it operates which includes a range of Personal Injury litigation services and other litigation services such as class actions. However, with the stock trading on a price-to-earnings ratio of approximately 19x some investors will consider it to be fully valued despite the growth potential.
Of course, a similar valuation argument can be made for Slater & Gordon Limited (ASX: SGH), which according to data supplied by Morningstar is currently trading on a forecast PE of 21x.
These are hefty multiples which obviously reflect investors' expectations for growth rates above the market average. Given that Shine and Slater & Gordon have outperformed the 9% return from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the past 12 months by around 54% and 44% respectively, investors may be best off waiting for a better entry point.
