Just posted this on the Slater and Gordon thread - thought that...

Just posted this on the Slater and Gordon thread - thought that i would mirror the comment here as it's a comparison between SGH and SHJ:

Let's look at a few numbers side by side.

	Totals for company('000)	SGH	SHJ
1	Share Price	$1.01	$0.85
2	#Shares	$124,810	$173,262
3	Total WIP Assets	$239,213	$305,102
4	Total Borrowings / Debt	$91,850	$52,499
5	Receipts from customer	$234,116	$175,566
6	Payments to suppliers and employees	$208,848	$144,389
7	Finance Costs	$5,451	$5,657
8	Operating Cashflow	$18,881	$24,754

	Comparison of Ratios	SGH	SHJ
1	Margin on Cashflow	8%	14%
2	Finance cost as % of Debt	6%	11%
3	Growth in total WIP (2019 vs 2020)	7%	8%

So observations on the above:
- Slater and Gordon currently has significantly more favourable finance arrangements i.e. lower interest rate etc. (but almost twice the debt)
- Shine currently has a much better cashflow margin i.e. it's keeping a greater percentage of cash coming in
- Shine is grew it's Work in Progress at a slightly better rate than Slater but there's not too much difference here.
- Judging by WIP alone, Shine is now doing more business than Slater.

Ok so to compare the companies on a quantitative basis who should we pick if we has money to invest? SGH or SHJ? Well let's factor in the Share Price and # Shares. If we spent $1 on the ASX, how much would this buy from each company? This will let us compare them like-for-like.

	Per $ invested	SGH	SHJ
1	WIP Assets	$1.90	$2.08
2	Borrowings / Debt	$0.73	$0.36
3	Operating Cashflow	$0.15	$0.17

As an example if you buy $1000 worth of SGH you get $1,900 WIP Assets, while SHJ would give you $2,080, etc.

In my opinion Shine is overall a better buy based on the current numbers (looking in the rear view mirror). However looking forward:

- Slater's cheap debt is a strong advantage.
- Shine is likely to make acquisitions in the coming years while Slater is likely to limit itself to organic growth (while it takes time to sort it's life out post the UK debacle). This means there's greater opportunity for Shine but also more risk if their management make poor decisions. Slater is being forced to tread water on acquisitions (sometimes this is a good thing) but COVID-19 and court closures may put pressure on smaller firms to sell in the near future which means that SGH may miss a trick here.
- Shine is still under the thumb of it's founders who own a controlling percentage of shares and come from a legal background. Slater's execs are from a management and consulting background and are non-lawyers; and I assume that they do not have large personal holdings of SGH stock. So how aligned are the interests of mum and dad investors with the execs of each company will be impacted by these factors (the topic is complex and there's pros and cons to both setups).

This is all a bit shallow of an analysis but I will leave it there. I've tried to be objective but I'll also call out my bias that I'm a current SHJ shareholder and former SGH shareholder. So take whatever I say with that in mind.

Looking at Slater by itself (not compared to Shine) it's a much better prospect than it was, so maybe looking forward the future will be bright. If you plan to spend your hard earned money on these stocks then obviously you should do your own analysis and not pay too much attention to people on the internet