Most brokers recommend FXL (8 buys, 1 hold, 1 underperform) and...

Most brokers recommend FXL (8 buys, 1 hold, 1 underperform) and did so throughout 2013, yet it has languished. Current consensus target price is $4.83. In November, UBS identified FXL as one of its most undervalued defensive stocks among its recommendations.

A few days before the HY14 results, Credit Suisse offered this explanation for FXL's depressed sp: "The weakness is probably related to a rising risk profile, with the company now experimenting with "interest free" as well as rising risks in the solar space." Two days later, the HY14 results revealed that the interest free cards performed strongly, and the solar business had actually increased revenue and NPAT even with lower gov't subsidies.

But Deutsche Bank did raise ongoing concerns about declining Flexirent earnings and credit card receiveables.

Another concern about FXL is that it's forward P/E of 15.8 is above the historic level (around 13-14 PE). However, after seeing this week's HY14 results, UBS commented: "The broker considers the stock has an outstanding track record of earnings growth in value-accretive acquisitions and remains well placed to justify current valuations."

Final observation: FXL has produced higher earnings than consensus every year since 2009 (maybe longer). In fact, it consistently reported above the highest consensus estimate in those years (Thomson Reuters data on the FinTimes stock site).

In spite of these positive characteristics, FXL might languish another year, or it might rise to its underlying value. Ultimately, the share price is what you pay, not the value you get.