http://qppsag.wordpress.com/2014/09/01/shine-shines-light-on-the-profitability-of-legal-services/
I felt that I could perhaps generalise this article a bit, but also take it a step further and do a wider comparison of the companies and thankfully I was given permission by the QPP SAG administration to rehash the article.
The first thing to say, is that these are probably the three most similar companies publicly available to compare and although they will not be exactly the same in the way they operate, they are significantly similar that there is value added to be gained from a comparison.
This table below is an easier way to understand the three companies based upon their current (or nearest) metrics (the numbers show are full year figures or estimates - marked by ranged figures taken directly from the company):
All of the figures have been converted into Great British Pounds for ease of reading.
| Company | Market Cap/£m | Revenue/£m | Current P/E Ratio | EPS/£m | EBITDA Margin/% |
| Quindell | 729.96 | 800-900 | 3.7 | 0.577-0.61.7 | 35-45 |
| Slater and Gordon | 774.87 | 241.41 | 20.63 | 0.18 | 24.6 |
| Shine Lawyers | 258.57 | 66.88 | 17.87 | 0.08 | 29.6 |
I'm going to be a little bit cheeky here and suggest that people have a read of my article on the positives and negatives of certain valuation metrics, because they're not all rosy and we must have a balanced mind when we look at these numbers:
http://themaskedstocktrader.blogspot.co.uk/2014/07/understanding-ratios-definitions.html
The first notable point that I would make is that I am going to leave the EBITDA comparisons to the guys over in the QPP SAG, so have a good read of the article linked to in my introduction there for more guidance.
Secondly, I feel that I ought to state the blatant obvious, which is that a direct comparison of Slater and Gordon and Quindell gives a clear indication that Quindell is significantly undervalued. This is illustrated by the fact that Quindell effectively destroys it in every category displayed, but still has a very similar market capitalisation to Slater and Gordon.
Thirdly, we can use a direct revenue comparison here to estimate that for Quindell to be valued fairly against Slater and Gordon we could expect the company to be trading at about four times its current value and on an earnings per share basis at around three times its current value.
In the case of doing a similar comparison between Quindell and Shine Lawyers, you would get figures in-between those found when comparing Quindell with Slater and Gordon.
To conclude what could otherwise be a very long article, I'm going to draw to a close earlier than usual, because I think that this table of investing metrics does a better job of explaining how undervalued Quindell is than I can. I would encourage people to keep their knowledge on Quindell red hot and also have a good idea of what the competition is up to, because on a bad day it helps me to remain positive and understand that I'm likely onto a big winner.
All the best,
The Masked AIM Trader
Sources:
http://www.shine.com.au/wp-content/uploads/2014/08/Investor-Presentation-August-2014.pdf
http://www.slatergordon.com.au/files/editor_upload/file/investors/fy14%20results%20presentation%20final.pdf
http://www.quindell.com/images/uploads/irdownloads2014/20140821_IR.pdf
https://www.google.co.uk/finance?chdnp=1&chdd=0&chds=0&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1400772600000&chddm=61320&chddi=86400&chls=CandleStick&q=LON%3AQPP&ntsp=1&fct=big&ei=97J9U-iEAbOBwAPzsIHYBQ
https://www.google.co.uk/finance?q=ASX%3ASGH&ei=jWsNVLjtDZKKwwOnoYHYBA
https://www.google.co.uk/finance?q=ASX%3ASHJ&ei=-mwNVIipKa6UwQOh9YCwDg
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