It's hard to imagine a company more loathed by investors than FlexiGroup Limited (ASX: FXL) right now.
The banks you say? No chance.
Retail?? Comparatively heavenly.
Energy??? Getting warmer, but even these huge, capital sucking, loss making, dividend-denying monsters are showing signs of share price recovery. Even shares in Santos Ltd (ASX: STO) have climbed 25% this year.
FlexiGroup, for its part, has lost 43% of its market value so far this year and even today, when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) is up 0.9%, FlexiGroup has dropped 1%. It's frustrating to watch as a shareholder (which I am), because the business is just not that bad.
Does the company look cheap?
By many relative measures FlexiGroup looks cheap. The current price means the company sells for just 1.1 times book value, 11.7 times expected full year earnings and still pays out an attractive dividend from its cash earnings.
The context for this is a weak outlook in which earnings per share are expected to decline slightly in FY17, according to median estimates from Reuters, as the company divests 'non-core' business units and refocuses on where it creates value – the consumer cards business and consumer lending.
Investors still not convinced
The divestments are part of a strategic review FlexiGroup recently undertook, but investors remain unconvinced.
This could be because they don't like the economic outlooks for Australia and New Zealand, which drive FlexiGroup's prospects. It's certainly true that New Zealand's economy has been running hot with property and a rocketing share market that have commentators questioning if the country is nearing the top of its economic cycle.
However in my view the current share price more than accounts for these fears, which from a contrarian perspective could make it an appealing addition to a diversified portfolio.
The company has a strong operational base, generating stable cash flows that delivered a 19% return on equity for the half year to 31 December 2015, while also feeding an appealing dividend.
