Buying distressed debt from credit-card companies and auto dealers may be a stressful business, but not to Gary Stern, CEO of Asta Funding (ASFI), who pays just pennies on the dollar for such loans. Asta's stock has been on a roll. Since being featured here on May 2, 2005, when it was trading at 20, the stock has soared to 33. Surging revenue growth of 46.5% and a profit leap of 49% in 2005 propelled the stock upward, says Steven DeLaney of Flagstone Securities, who tags the stock a "buy." Despite the sharp rise, Asta remains attractive, he argues. Audrey Snell of ThinkEquity Partners, also a bull on Asta, raised her estimates after the company reported a "very strong" December quarter. In that period, Asta bought $2.1 billion in receivables for just $102.4 million. She lifted her earnings forecast for the year ending Sept. 30, 2006, from $2.60 a share to $2.70. For 2007, she expects $2.86. Ivan Feinseth of securities outfit Matrix USA (MUSA), who upgraded Asta from "hold" to "buy," says Asta's stock has an intrinsic value of 47.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial