Is now the time to buy Neil Woodford-favourite Provident Financial, up 13% today?

Neil Woodford made headlines last year when Provident Financial(LSE: PFG), one the top holdings in his Equity Income fund, crashed spectacularly. At the start of May last year, shares in the doorstep lender were changing hands for nearly 2,400p. However, by early September, they were trading for under 600p, after the group released back-to-back profit warnings and cut its dividend.

While PFG shares are still a long way from their highs, they've surged 13% today on the back of the firm's interim results. Is it time to take another look at the sub-prime lender?

Poor results

While the market clearly likes today's results, I'm not seeing enough from the company to warrant buying the shares just yet.

For example, for the half-year ended 30 June, group adjusted profit before tax on an IFRS 9 basis came in at £74.9m, down 24% on £98.6m last year, with adjusted earnings per share falling 36% to 24.2p. Performance in home credit was particularly disappointing, with the division generating an IFRS 9 adjusted loss before tax of £23.2m versus a profit of £4.7m last year. The group stated that collections performance in home credit didn't show the improvement that was expected, mainly due to lower collections from customers during the poorly-executed migration to the new operating model last summer. No dividend was declared for the period, although the firm did say that the board "reconfirms its intention to restore dividends with a nominal final dividend for 2018."

Woodford is clearly still bullish on PFG, as it was the fourth-largest holding in his flagship fund, with a weighting of 4.2%, at the end of June. The fund manager also recently participated in the group's £331m rights issue, taking his holding in the firm to 24% of its outstanding shares. However, I'll be waiting for signs of more momentum before committing any capital to the stock.

Another Woodford blowout

One Woodford-owned stock (which also crashed spectacularly last year), that I would be more inclined to look at is over-50s insurance and travel specialist Saga(LSE: SAGA). At 30 June, Saga had a 1% weighting in Woodford's Income Focus fund.

In December last year, Saga's share price plummeted from 180p to 125p, after the group advised that profitability had been hit by a combination of the Monarch Airlines collapse and tougher conditions in its insurance division. However, since then, trading conditions appear to have stabilised and in June, the company advised that trading for the first four months of the year was in line with expectations and that the group's targeted investment in customer growth was driving both growth in branded retail insurance policies and cruise bookings.

At the current share price, Saga shares look cheap. With analysts forecasting earnings and dividends of 13.1p and 9p for FY2018 respectively, the forward P/E ratio is 9.4 and the prospective yield on offer is a high 7.3%. With these figures in mind, I retain my view that Saga could be a good stock to buy and tuck away for a few years. Growth may be subdued in the short term, yet the company looks well placed to profit from the UK's ageing population over the long term.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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