Time Finance: Undervalued, under the radar

In a market where small cap lenders often struggle for airtime, it’s easy to miss the quiet compounders — the ones with rising profits, solid underwriting, and a habit of doing the basics very well.

Time Finance’s latest trading update paints a picture of disciplined growth, operational momentum, and undervaluation — a rare combination in the current climate. This isn’t a speculative turnaround or a blue-sky story. It’s a profitable lender with a growing book and a valuation that still looks modest, even after a strong run in recent weeks.

Making money flow for UK SMEs

Time Finance provides tailored funding solutions to more than 10,000 UK businesses, with a focus on small and medium-sized enterprises that often sit below the radar of larger financial institutions. Their core lending activities span asset finance, invoice finance, and commercial loans — all geared toward helping businesses invest in equipment, manage cash flow, or seize growth opportunities.

The numbers are starting to tell a very consistent story. In its trading update for the nine-month period ended 28 February 2025, Time reported a 17% increase in revenue to £18.2 million for the first half, with pre-tax profits for the full year expected to come in at £5.9 million — up 40% from £4.2 million the year before. EPS is up 33.4% over the past twelve months, and the company has delivered compound EPS growth of over 27% per year across the last three years.

Crucially, this isn’t being driven by a stretch for yield or riskier borrowers. The group’s operating margin now sits at a healthy 20.6%, and gearing remains low. Time’s Piotroski F-Score — a quick health check used by value investors to screen for quality — has improved to 7 out of 9, reflecting rising profitability, improving return on assets, and strong operating cash flow.

What’s also encouraging is that the growth appears self-funded. Net debt has continued to fall, and with positive free cash flow once again on the table, the business is beginning to generate the kind of surplus capital that offers flexibility — whether that’s reinvestment, bolt-on acquisitions, or eventually, the return of a dividend.

Valuation: One of the cheaper lenders on the market

Even after a 12% rise in the share price over the last month, Time Finance still looks cheap. The shares trade on a forward P/E of just 8.2, well below what you’d typically expect for a lender growing earnings at this clip. The PEG ratio sits at 0.9, suggesting the valuation still doesn’t reflect the pace of growth.

It’s worth noting that there’s no dividend on offer right now. But that may not be the case forever. With profitability rising and the balance sheet in better shape, the conversation may soon shift from survival to capital return. And in a market increasingly drawn to income and capital efficiency, that pivot could catch attention.

Time Finance won’t grab headlines like AI chipmakers or oil majors, but it doesn’t need to. What it offers is quieter, but no less compelling: double-digit earnings growth, solid underwriting, and a valuation that still looks stuck in the past. We believe Time is a compelling choice for those looking for a high quality growth story.