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  • johndaley404 johndaley404 Mar 21, 2013 10:25 AM Flag

    Does anyone follow this company?

    After last quarter and the AACC acquisition, thought this company would be rallying hard. As fyi, am getting to $4.50 of 2014 EPS now, vs. $3.12 in 2012. That's almost locked in judging by all of the portfolio acquisitions so early in 2013. So they are trading at 6.5x 2014 EPS while growing EPS at 20%+ / yr. All of their competitors are going away and they have yet to actually really unveil their internal legal and their Costa Rica operations which should lower costs even more.

    I've gone over all of their Robo-signing documents and they were wrong about signing those docs, but not about who owed what. Their last agreement was for $5m, yes this one will be higher, but not $200-$300m higher which is where the market seems to be seeing this play out. That would imply $850 / claimant ($17 previous * 50), or less than they would have collected in the first place! Obviously, legal costs will go up for the next few quarters a bit, but they will settle.

    Their long-term cost advantages vs. everyone and their shrinking competition (due to regulatory costs) makes the long-run business model stronger now than ever before.

    Am interested to know what am missing here as it continues to underperform everything.

    The reality is PRAA should buy them for stock as it would be massively accretive and there is still enough fragmentation where anti-trust shouldn't be a concern.

    Sentiment: Buy

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    • I've followed these guys a long time and the market does tend to underprice their correct value IMO but a concern recently of mine is just a lack of business going forward for a few years at least. I never thought I would see it but hasn't credit card usage dipped substantially and bad card debt gone down even more. I know it has led to less competition and it certainly isn't going away forever but they may have difficulty finding enough supply to keep the growth engine fueled.

    • John, I see the same things you do and like the stock for all the reasons you've listed. I think the regulatory environment combined with the unsettled lawsuit have made the larger institutions a bit wary of the stock. I think this is a great time to be a buyer; I love the recent acquisition and hope it can close quickly. Its a smart move given the lack of good opps to purchase distressed credit from banks.

      If they continue to perform well and hit their internal targets for 15%+ growth in eps, eventually this stock will get a higher multiple. I don't see any reason why this stock shouldn't be trading in the low 40s based upon their outlook and analyst estimates (which they usually beat every quarter.)

 
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