Asta Fdg Inc (NASDAQ:ASFI)

CAPS Rating: 5 out of 5

Acquires, manages, collects and services portfolios of consumer receivables. These portfolios generally consist of one or more of the following types of consumer receivables: charged-off receivables; semi-performing receivables and performing receivables.


Player Avatar FRRElement (98.74) Submitted: 3/25/2008 11:19:29 PM : Outperform Start Price: $15.23 ASFI Score: -96.13

Asta Funding is a very unique company that is in the business of buying bad debt from credit card companies and then sending their team of lawyers out to collect on that acquired debt. The secret to their success is that they are able to buy that debt for about 10 cents on the dollar. So if they collect lets say 15 cents on a credit default, that accounts to a 50% profit because they only paid 10 cents for the rights to that debt. The company is in the right business at the right time as people are defaulting on their credit cards in droves. This should create tremendous opportunities for the company going forward.

As an investor you should closely look at this future winner in that it has absolutely been trashed by Wall Street and since it is classified as a Finance and Loan company it has been brought down with the rest of the financial industry. But is that justified? Absolutely not! The reason is that we have done our analysis of the stock and find it to have a FireRock Element (Main Street Valuation per share) of $48.35 while the stock trades at around $16. This is a stock that has reached what Sir John Templeton had once quoted "The point of maximum pessimism". The best time to buy stocks is when everyone hates them. Asta Funding is such a stock. The reason that people are not buying it is because they have never heard of it and it never hits the top tier of news coverage.

Here is a stock that once traded at $46 and now trades at $16. Because no one knows about it that gives us the advantage and anytime you have the advantage in the stock market you win big most of the time. Asta Funding is expected to earn $3.68 ( TTM) a share and has a PE of 4. A few years ago I created a ratio called the Psaras Ratio which simplified is PE/ROE. When the result is less than 1.0 the stock is undervalued and when it is over 1.0 it is overvalued. The farther it goes below 1.0 the more attractive the stock becomes. I have backtested this ratio for over a decade with impressive results, but I won't bore you with the details right now.

Asta Funding has a PE of 4.45 and a Return on Equity of 24.34% so if we do the math = 4.45/24.34 we get .18 as a result for the Psaras Ratio. To show you what a bargain we have with Asta Funding let us compare that number to a Psaras Ratio result of a stock that Warren Buffett recently purchaed called GlaxoSmithKline (GSK). If we do the math for GSK we get a PE of 11.61 divided by a ROE of 52.42% = 11.61/52.42 = .22. So in purchasing ASFI at these levels you are getting a valuation less than Warren Buffett got in buying GSK for Berkshire Hathaways portfolio.

Member Avatar WPThatcher (26.66) Submitted: 5/5/2008 1:48:09 PM
Recs: 0

Do you have any information on how successful(expressed as a percentage) ASFI is at collecting on the debt they buy? How did they fair during the recession at the turn of the millenium or back in 1991?

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