QuickFee (ASX: QFE) has been rallying strongly this month, after releasing strong annual results. The company reached $42m of lending for their Australian business, which is up 15% on the previous year. While this may not seem particularly strong, their US business lent out $8m and grew 70% on the previous year, presenting an exciting avenue of growth. The company still doesn’t make a profit but is rapidly growing its revenue and scaling its client base. Since investors were not expecting the company to grow as fast as it ended up growing, they have revised their estimates for the company’s future financial performance upwards, causing an uplift in the share price.
QuickFee has rallied 34% in the past month after releasing strong annual results, catching investor attention (Credit: Accounting Today)
What QuickFee does is handle fee collection for professional services clients. If an accounting firm completes audits a bank for instance, they can put that transaction through QuickFee and be paid immediately. What this means is that the client boosts their cash flow by an average of 45 days and has the money to pay their employees before they complete the service. As such, they do not have to have large cash reserves to pay people in the event that a client does not pay them on time. Companies using QuickFee also benefit from not having to have a department chasing up missing payments, as QuickFee can capitalise on economies of scale to specialise in that service and do it better than anyone else in the market. Because QuickFee is chasing up the late payment, the collection process will not damage the client relationship.
The company also has a high return on equity, which currently sits at 70%. One potential issue though is the possibility of bad debts arising in the business. Bad debts often surface in financial crises, when businesses are at their most vulnerable, so this is definitely a factor that investors should monitor closely.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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