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Friday, 01/02/2004

Taxiing into 2004
By Nich Sheldon
TAXI - Medallion Financial Corp

Company Description

Medallion Financial Corp. is a specialty finance company with a leading position in the origination and servicing of loans financing the purchase of taxicab medallions and related assets. The Company also originates and services commercial loans financing small businesses in other targeted industries, and operates the largest taxicab rooftop advertising business in the world. The Company and its subsidiaries have lent over $1 billion to the taxicab and commercial equipment industries.

[Source: Company Press Release]

Reasons to Invest:

Well, well, 2004 is underway and we're aimed at starting the New Year off with profits. This week's DRIP of the Week is fundamentally sound as well as affordable.

Medallion Financial Corp. (NASDAQ:TAXI) is this week's Drip of the Week. TAXI traded as low as $3.18 last March, and since then it has been on the up and out. The 52-week change for TAXI is 143.33 percent and in relation to S&P 500, the 52-week change is 92.54 percent. Three days ago the stock set a new 52-week high of 9.50.

Medallion Financial Corp. has a profit margin of 9.10 percent which is excellent when you consider that their revenue growth was -8.60 percent over the past few quarters. The company has sported an annual growth rate of 17% since 1996.

TAXI announced that their net investment income (before taxes) more than doubled in the third quarter (03), to 696,000 or $0.04 per share, which is up from 312,000 or $0.02 per share in the second quarter of 2003. Their net income rose to $1,111,000 or $0.06 per share, up from $755,000 or $0.04 per share in the second quarter, and changed from a loss of $8,384,000 or $0.46 per share in the 2002 third quarter. The third quarter of 2003, was the most profitable quarter out of the past eight quarters for TAXI. In a news release, TAXI's president Andrew Murstein noted that TAXI has "shown continued increases in both assets and profitability in each and every subsequent quarter [in reference to the past eight quarter]."

Mr. Murstein went on to note, "We are also pleased to announce that the Board of Directors has approved the first ever stock buy back in the history of the Company. The Company has empowered the Company, in its discretion, to repurchase up to $10,000,000 of its outstanding common stock from time-to-time. Pursuant to relevant requirements, the Company, should it pursue this program, will send out notices to our shareholders of record indicating our intention to repurchase shares, and then start the program shortly thereafter." This quote posed me with a question. There are two things that I am curious about. One, if the company is starting its first ever stock buy back program this could mean that the company seriously does see a great growth outlook and therefore would like the opportunity to buy as many shares as possible in order to catch the hike up. Or two, the company is saying this in hopes to attract new buyers to the stock and make them feel that this is the case. I however believe that the company has been around for more than sixty years (however, they went public in 96) and that is reason enough to make me believe that the heads of TAXI are not planning on dumping the stock any time soon.

Last October TAXI was granted approval by the FDIC for Federal insurance for it's subsidiary, Medallion Bank. Medallion Bank would provide an excellent platform to grow two of TAXI's most profitable lending areas, taxicab medallion lending and asset- based lending. This also allows TAXI the benefit of accepting FDIC-insured deposits, of which will greatly lower their cost of funds. This should prove to reduce their borrowing costs and increase their margins.

TAXI yields a 2.11 percent dividend, which tallies out to $0.20 per share per year. The payout ratio on their dividend is 29.20 percent. This quarterly dividend of $0.05 might not be anything to write home about, but when you consider the stock is trading under $10.00 it makes a world of a difference. The closing price on TAXI as of January 2nd, 2004 was 9.25. Thus, making ownership of one contract of TAXI less than a thousand dollars.

TAXI is ranked right in the middle of industry over the past year, and has been improving with each passing week. On top of that, TAXI is about to record their first positive earnings year in three years. What I mean by this, is that in 2001 their EPS was -0.24. In 2002 their EPS was -0.69. The company has reported positive earnings for all of 2003 and tends to build upon this throughout 2004. While their total EPS for 2003 has not yet been announced, the company has reported 0.12 EPS for the first three quarters, and are estimating an year end EPS of 0.17. That is quite a difference when you calculate last years -0.69 EPS.

This ends another exciting episode of the DripAdvisor.com Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the DripAdvisor.com limelight.

Until Next Week,
Nich Sheldon
Editor

Broker Recommendations

Strong Buy         1
Buy                1
Hold               0
Sell               0
Strong Sell        0

Brokers Covering  2


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = No
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

Min/Max Investment = $5,000/Quarter


Reinvestment Fees - 
Dividend investment fees: 0
Cash investment fees: 0
Auto reinvestment fees: None


Transfer Agent:
American Stock Transfer
800-278-4353


Corporate Headquarters:
437 Madison Avenue
New York, NY 10022
Phone: (212) 328-2100
15) 226-2323



 
 

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