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What a quarter it's been for Element Financial, the new baby of financing magnate Steven Hudson.

In just over three months the company has seen its stock soar 40 per cent and all of a sudden many more people are watching it because Element was just added to the S&P/TSX Composite Index.

Not bad for a company that went public in late 2011 when it was just an infant. Early investors simply had to trust Mr. Hudson, who'd made a name for himself by building leasing company Newcourt Credit Group Inc. in the 1990s. Element was his way back into the market.

At the time Mr. Hudson argued that there was a huge dearth of financing for mid-sized firms because they couldn't get money from the banks, and he saw a 12-to-24-month window to enter the market during which he could scoop up some small competitors and make his presence known.

He's well on his way.

On a conference call Wednesday analyst John Aiken at Barclays Capital noted that management was "decidedly upbeat" when they formally released their year-end earnings. It's still early days for the company, but the bottom line is starting to grow and profit is expected to jump over the next year following the recent acquisitions of CoActiv and Nexcap.

The company is also hoping to add a new fund. At the moment it has three divisions: Element Capital, for big ticket financing; Element Finance for mid-sized financing; and Element Fleet for vehicles. If everything goes well, management will soon close an equipment finance fund to fund transactions in the $1.5-million to $25-million range.

Despite the growth expectations, there certainly are warning signs. Like so many financial institutions, low interest rate have hurt the margins these companies make on money they loan to others. Plus there is always the fear that Element grows too quickly, something Mr. Hudson learned the hard way by pursuing too many acquisitions at Newcourt.

He's pledged to be much more conservative this time around. We'll see if that's true when the two-year window for scooping companies up on the cheap – Element's early game plan – closes soon.

Early in 2013 the company's origination pipeline is north of $1.5-billion and its explosive growth has helped the shares earn a premium valuation. After such a rapid rise, the next 12 months are crucial because any signs of a slowdown could make the investors who just piled in quite wary.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 4:00pm EDT.

SymbolName% changeLast
EFN-T
Element Fleet Management Corp
+1.1%22.09

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