Shares of PRA Group, Inc. PRAA scaled a fresh 52-week high of $37.08 on Nov 8, before closing the day at $36.78. Impressive earnings performance in the third quarter and strategic initiatives contributed to this rally.
Over the past year, the Zacks Rank #2 (Buy) stock has gained 22%, significantly outperforming the industry’s growth of 6.2%.
Let’s delve deeper and analyze the factors responsible for the stock’s upsurge.
PRA Group delivered an impressive performance in the third quarter with earnings of 55 cents, which beat the Zacks Consensus Estimate by 17% and also grew 150% year over year. This better-than-expected performance was driven by a rise in revenues.
Investors were impressed by the company’s ability to deliver stellar top-line growth and solid cash collection supported by an increase in U.S. legal collections, Europe Core collections and U.S. call center plus other cash collections. The company’s income recognized from finance receivables during the reported quarter grew 11% year over year to $247.5 million.
PRA Group continues to focus on expanding its presence beyond debt collection business. The company also deals in government collections and audit services. Various acquisitions in the past have helped it consolidate its government business and also boost its nonperforming loan business across certain geographies.
Additionally, its receivable income has been rising since 2009 (except 2016). This upside continued in the first nine months of 2019 owing to the company’s recent purchase of Americas and Europe Core, increased portfolio purchasing in South America, etc.
The company is likely to benefit from better cash collection, riding on the Americas Core and European Core. We expect this trend to be consistent on the back of volume of purchases as well as higher collector base and productivity considering the relatively favorable macro environment for collections.
PRA Group enjoys strong liquidity that allows it to deploy cash for several investments. It raised its credit facility in the United States. We expect this metric to improve, which should provide the company with financial flexibility.
Other Stocks to Consider
Investors looking for some other top-ranked stocks might consider AXA Equitable Holdings, Inc. EQH, CURO Group Holdings Corp. CURO and On Deck Capital, Inc. ONDK for their portfolio enhancement.
AXA Equitable Holdings works as a diversified financial services company. The company came up with a positive surprise in all the last four quarters, the average being 12.4%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CURO Group Holdings is a diversified consumer finance company. It has a Zacks Rank of 2 and a positive surprise of 16.6% over the preceding four quarters.
On Deck Capital operates an online platform for small business lending. The stock’s average four-quarter beat is 8.3%. It is a Zacks #2 Ranked player.
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