Do today’s results make these under-the-radar large caps stellar opportunities?

Solid results make these three relative unknowns worth a second look.

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In a society as addicted to cheap credit as ours, it’s no surprise that collecting on the inevitable defaults is big business. That’s where Arrow Global (LSE: ARW) comes in. The company buys packages of defaulted customer accounts for a discounted rate from financial institutions and then tries to collect as much as possible on the investment.

Interim results announced this morning suggest the data-driven approach to collections is working as year-on-year revenue leapt 34% and pre-tax profits were up 24.7%. So with astounding top line growth, high margins and dividends offering a 2.8% yield with room to grow, why are the shares trading at a mere 9.9 times forward earnings?

Perhaps surprisingly for a company that buys defaulted loans, the company is comfortable tacking on significant amounts of leverage. At the end of June the company owed some £739m, good for 3.8 times EBITDA. And, while Arrow believes it will bear little ill effect from any Brexit-related slowdown, there’s always the risk customers without a job will be less likely to pay off old loans.

Building profits

Unless you’re big into DIY home repairs or are in the building industry, Grafton (LSE: GFTU) may be one of the biggest companies out there you haven’t heard of. Grafton sells building supplies to retailers and contractors alike and business is booming with revenue over the past six months climbing 14% year-on-year to reach £1.2bn.

As you can imagine though, margins in this industry are very tight. That’s why statutory operating profit for the same period clocked in at a meagre £66.1m. That means operating margins were a very low 5.3%.

The good news is that Grafton has a healthy balance sheet with only £95.7m of net debt and earnings covered dividends a very safe 3.3 times over last year. It’s always good to see a company’s management remain level-headed during the boom years and avoid over-leveraging to fund unsustainable growth and pay huge dividends.

However, reliant as it is on the continued health of the homebuilding industry and offering quite low margins, I believe there are better options to gain exposure to the sector.

Room to grow

Irish Continental Group (LSE: ICGC) is another name that may not mean much to many, but if you’ve ever taken a ferry between Britain and Ireland it’s likely you set sail on one of their vessels. Alongside passenger and freight ferries, the company also runs cargo terminals at the Belfast and Dublin ports.

This business is inextricably tied to the health of economies on both sides of the Irish Sea and with the Celtic Tiger roaring once again, times have been good. Interim results released today showed revenue up 5.2% and operating profits up 27% year-on-year to €150.5m and €20.8m respectively.

With the fallout from the last time the Irish economy collapse fresh in its mind, management hasn’t allowed itself to be carried away by bumper results. Net debt was whittled down to a mere €18.9m at the end of June while dividends rose a sustainable 5%.

ICGC’s business may not be very exciting but it’s relatively reliable and the current 1.9% dividend yield has room to growth with earnings covering payouts a solid 2.6 times over.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ian Pierce 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.

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