PRA Group, Inc. (NASDAQ:PRAA) just released its quarterly report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$252m, some 4.2% above estimates, and statutory earnings per share (EPS) coming in at US$0.42, 138% ahead of expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, PRA Group's five analysts currently expect revenues in 2020 to be US$1.05b, approximately in line with the last 12 months. Per-share earnings are expected to step up 18% to US$2.33. In the lead-up to this report, the analysts had been modelling revenues of US$1.04b and earnings per share (EPS) of US$1.80 in 2020. Although the revenue estimates have not really changed, we can see there's been a considerable lift to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 6.3% to US$36.40. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic PRA Group analyst has a price target of US$45.00 per share, while the most pessimistic values it at US$30.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the PRA Group's past performance and to peers in the same industry. The analysts are definitely expecting PRA Group'sgrowth to accelerate, with the forecast 1.7% growth ranking favourably alongside historical growth of 0.9% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.1% per year. So it's clear that despite the acceleration in growth, PRA Group is expected to grow meaningfully slower than the industry average.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around PRA Group's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on PRA Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple PRA Group analysts - going out to 2022, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with PRA Group (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.
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