S&U (LSE: SUS) released strong half-year results this morning — as expected — and the shares are unchanged in early trading. At a price of 2,435p, this non-standard finance specialist is valued at £291m.

Could S&U be a better buy than its £4.3bn FTSE 100 peer Provident Financial (LSE: PFG)? The latter is Neil Woodford’s top pick in the financial sector, being the number five holding in his flagship equity income fund.

Advantage

S&U today announced a 39% rise in revenue on the same period last year. Profit before tax and earnings per share came in 35% and 36% higher, respectively, and the board hiked the first interim dividend of the year by 20%.

The company, which was established in 1938 and continues to be carefully stewarded by the descendants of the founding family, sold its original home credit business last year for a profit of £50m, leaving Advantage Finance (motor finance) as its major operation. Today’s superb numbers and a strong balance sheet (record low gearing of 29%) vindicate management’s decision to dispose of the doorstep-lending business to focus on high-growth motor finance.

The proceeds from the disposal and a recent agreement with its lenders to increase committed funding facilities by £15m to £85m give S&U substantial headroom to fund both future organic growth at Advantage and new initiatives. An example of the latter is a pilot property bridging finance business, where management sees “significant potential.”

Excellent time to buy

Ahead of today’s interim numbers, analysts were forecasting earnings growth of 28% for the full year, followed by 20% next year, giving price-to-earnings growth (PEG) ratios of 0.5 and 0.6, indicating that now could be an excellent time to buy this stock.

The appeal of S&U is only increased by a prospective 3.6% dividend yield, rising to 4.3% next year, and by Advantage having continued to trade “very well” since the Brexit vote and, historically, having “prospered through periods of both economic upturn and downturn.”

Woodford’s favourite

Emphasising the attractiveness of the non-standard motor finance market, Provident Financial, extended its operations of sub-prime banking, and home and online consumer credit with the acquisition of motor finance business Moneybarn two years ago.

In its most recent half-year results, Provident reported an 18% rise in group profit before tax, with Moneybarn being the smallest division but posting the highest growth at 45%.

Woodford has been buying more shares in Provident in recent months, having met with the group’s chief executive and senior management since the Brexit vote. Woodford and his team liked what they heard, and said the meeting “strengthens our conviction in the company’s long-term prospects”.

As a FTSE 100 company with diverse businesses, Provident’s valuation is somewhat higher than S&U’s. Nevertheless, it’s delivered consistent annual double-digit earnings growth. And with a prospective dividend yield of 4.5%, rising to 4.9% next year, I also rate this stock a buy based on a current share price of 2,850p.

Outstanding prospect

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.