Sustainable earnings growth is the rarest of commodities, with one recent note highlighting that the vast majority of stock price increases over the past 4 years have been due to PE expansion.

One of our key holdings – Pioneer Credit (ASX:PNC) – boasts earnings growth of >40% for the 2015 FY and in excess of 30% for the current FY. If this modelling proves accurate, then PNC is on a PE ratio of 8.5x FY16 and a forecast yield of 5.9% fully franked.

Importantly, we also see double digit EPS growth in the following years due to a combination of organic growth, scale benefits and the launch of PNC’s own financial products.

Whilst PNC was only listed in May 2014, it is following the well-worn path of its larger listed rival Credit Corp (CCP). CCP listed in September 2000 at 50c per share, but today it is trading at ~$12.50 and has paid $2.34 in dividends ($3.34 including franking credits).

If PNC is able replicate even part of this success, then it will be a rewarding investment for patient shareholders.


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