This ASX 200 director has snapped up shares after a 40% crash, should you?

Is this an opportunity worth collecting?

| More on:
A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Credit Corp Group Limited (ASX: CCP) share price has been crunched 40%, is this a good time to invest in the S&P/ASX 200 Index (ASX: XJO) share? A director certainly thinks so.

As we can see on the chart below, the business is close to a multi-year low and it's not far off the bad part of the COVID-19 crash. It was higher in April 2020 than it is today. It's down 40% from mid-September 2023.

For readers who don't know what the ASX 200 share does, it's a debt collector with operations in both Australia and the US, and it also has a lending division as well.

What's going wrong for Credit Corp shares?

The company recently held its annual general meeting (AGM) for shareholders and changed its guidance.

When it released its FY24 guidance in August 2023, it said it was expecting purchased debt ledger (PDL) investment of between $200 million to $250 million and net lending of between $45 million to $55 million.

The August guidance also suggested net profit after tax (NPAT) guidance of between $90 million to $100 million.

Credit Corp recently revised its guidance to include an impairment, which I'll talk about in a moment. PDL investment and net lending guidance were the same, but excluding the impairment, the underlying NPAT guidance for FY24 is $80 million to $90 million, while statutory NPAT is guided to be between $35 million to $45 million.

The company said that there has been a sustained deterioration in US collection conditions, with increased repayment plan delinquencies emerging in the FY23 fourth quarter and that has persisted throughout the first quarter of FY24.

That's why the ASX 200 share decided to re-forecast the remaining collections to reflect a continuation of these conditions over the medium term.

The estimated impairment is 14% of the FY24 opening US PDL book (being $45 million of NPAT). The current US segment NPAT outlook was reduced by $10 million.

However, Credit Corp did point to sustained US operational productivity improvement. Lending growth is "tracking to expectation" with "strong demand", arrears are dropping and the business is expecting free cash flow to jump in the second half of FY24 compared to the FY24 first half.

Director buys shares

It was recently announced by the ASX 200 share that director James Millar bought 9,000 Credit Corp shares for a total of $111,681. That works out to be a Credit Corp share price of $12.40.

When a director buys shares it's often seen as a vote of confidence in the company, as well as a tick of approval that the current valuation is attractive.

While the short-term may be uncertain and volatile, the business may be able to achieve a turnaround in the longer term. I'd say that's what management is thinking and hoping.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Financial Shares

2 rising ASX financial shares with 'meaningful upside' still left: fundie

Financials outperformed every other sector in FY25, but there are still buying opportunities left, say these experts.

Read more »

Frustrated and shocked business woman reading bad news online from phone.
Financial Shares

Macquarie shares sink 5% on Q1 update

The investment bank is having a tough start to the year.

Read more »

A man holds his baby on his lap at the dining room table while he looks at his laptop screen earnestly.
Financial Shares

After its result, does Macquarie rate AMP shares a buy, hold or sell?

The financial services company released a strong second-quarter update on Monday.

Read more »

A blockchain investor sits at his desk with a laptop computer open and a phone checking information from a booklet in a home office setting.
Broker Notes

Are non-bank lenders a lucrative alternative to the big 4 banks?

The big 4 banks are widely perceived as being fully valued or overvalued.

Read more »

Red sell button on an Apple keyboard.
Financial Shares

ASX 200 financials was the best sector of FY25. But it's time to sell these 2 stocks, say experts

The ASX 200 financials sector gave investors a near-30% total return in the 2025 financial year.

Read more »

Happy woman working on a laptop.
Financial Shares

AMP share price jumps on strong Q2 update

Let's see what the financial services company reported for the quarter.

Read more »

A woman holds up hands to compare two things with question marks above her hands.
Financial Shares

The pros and cons of buying IAG shares this month

Is this the right time to invest in the insurance giant?

Read more »

man analysing share price
Financial Shares

ASX 200 financial services rivalry: Should I buy Hub24 or Netwealth shares?

Let's compare the pair.

Read more »