The Zip Co Ltd (ASX: Z1P) share price is up around 9.5% right now, what’s going on?
Zip Co provides customers with a revolving line of credit to finance their retail purchase with its brands of Zip Pay, Zip Money and Pocketbook. It is one of the largest buy now, pay later providers in Australia. Some of its largest clients include Bunnings Warehouse, Appliances Online, EB Games and Officeworks.
Why Zip Co Shares Are Rocketing
There is a lot of excitement surrounding Zip Co, Afterpay Touch Group Ltd (ASX: APT) and Splitit Ltd (ASX: SPT).
But, arguably Zip Co is pumping out quarterly growth good enough to justify the 80% growth of the share price that we’ve seen over the past month.
In the March 2019 quarter update Zip Co revealed record quarterly revenue of $23 million, which was 20% higher than the December 2018 quarter. Receivables, or money owed to Zip Co, increased to $565.3 million, which was 16% higher than the last quarter.
Underlying transaction volume reached $281.4 million, this was a 107% increase compared to the same quarter in 2018. Customer numbers increased by 143,000 to 1.2 million, which was an increase of 14% compared to the second quarter of FY18.
Not only is the income side growing strongly, but losses (as a percentage) improved with net bad debt of 1.75%, down from 1.81% in the second quarter. Operating leverage also continues to improve with scale. Costs, as a percentage of average receivables declined from 16.1% in the second quarter to 15.5% in the March 2019 quarter.
With many large, leading clients on its books like Chemist Warehouse and Bunnings it’s clear the Zip Co can win big clients in Australia. If it plans to expand overseas then Zip Co could jump even higher.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.