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Strong outlook for OzForex

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This week Money asks Skaffold for a hot stock pick - OzForex (ASX:OFX)

Key statistics:

22/09/15 closing share price: $2.52

OzForex

52 week high: $2.98

Most recent dividend yield: 3.584c

Annual dividend yield: 2.83%

Whilst OzForex is only a new addition to the ASX, listing in October 2013, it has been in business since 1998. Starting out as a foreign exchange information website, OFX has grown to become one of the world's largest international payment businesses.

Headquartered in Sydney, OFX has offices in the United Kingdom and Canada, and is expanding into the US, Europe and Asia Pacific.

At the company's AGM in August 2015 chairman Peter Warne reported income, profit and earnings had increased 20% in FY2014. In 2006 OFX transacted around 40,000 payments. Today that number is closer to 400,000.

Skaffold forecasts flat growth for the next six months but the longer-term future looks bright. By 2018 earnings could be as high as 18 cents per share, and dividends 13 cents. It took OFX 10 years to reach $100 million annual revenue. Its CEO has said in just three more years OFX will hit $200 million.

Future growth will be driven by OFX's expansion into the US. Over in the US the value of their international trade is 13 times greater than our own; there are four times the amount of small businesses and their foreign born population, who consistently send money overseas, is seven times larger than Australia's. Given those numbers, it's little wonder the company is focused on penetrating the US market.

Return on equity is the best measure of a company's economic performance and since 2011 OFX has averaged more than 60%. Looking to the future, Skaffold forecasts this will be sustained. Of the 1800-odd stocks listed on the ASX, only OzForex and Platinum Asset Management can boast such an impressive history of consistent economic performance. That certainly says something about the quality of OFX's business and its management team.

Skaffold forecasts OFX's shares could be worth around $3.20 by 2018. Buying the shares at today at $2.30 represents good value.

OzForex

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