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Good Growth, Cheap Price

Stock (Symbol) Stock Price

PRA Group (PRAA)

$57

Data is as of Expected to Report Sector

May 20, 2015

Aug 3 – Aug 7

Finance

Sharek’s Take
David SharekPRA Group (PRAA) lost a judgement of $83 million to a woman it harassed over someone elses debt who had the same name. She sued PRA after the company kept harassing her over a credit card she never owned. The company was fined just $250,000 and the rest was punitive damages. PRA is obviously appealing, as this is ludicrous, and the stock hasn’t sold off on the news. Otherwise, business is good with profit’s up 38% last quarter, but PRAA is set to go through an erratic earnings year where profits vary between 6% and 38% per qtr. EPS growth the next 4 qtrs is expected to average a robust 19% and the stock’s P/E of 12 makes it undervalued with high upside.
One-Year Chart
PRAA_2015_Q2Wow, just 12 times earnings. Stock should be up more. I looked back at the research report from a year ago and PRAA had a P/E of 13. Profits were expected to check in at $3.94 for the year vs $4.83 this year. This stock is cheap.
Earnings Table
PRAA_2015_Q2_EPSLast quarter revenue growth was a robust 26% while profits surged 38%. The company has been posting erratic growth due to its recent purchase of Aktiv Capital which is in Europe.
 
PRAA beat the street by 9 cents.   
 
Annual Profit Estimates rose a bit.
 
Qtrly profit growth is expected to average 19% the next 4 qtrs, but the rate of growth isn’t expected to be consistent.
Fair Value
PRAA_2015_Q2_PHI feel as though PRAA should get its 17 P/E ratio back like it had during the 2005-2007 period. If that were to happen we would achieve great gains. My optimism might be too high, but still the stock should get to 14-15x earnings right?
Ten-Year Chart
PRAA_2015_Q2_10yrLong basing periods such as this often lead to big moves in the stock price. Also profit growth the last ten years has been better than stock growth, and that usually means stock growth should catch up.
Power Ranking Bottom Line
Growth Portfolio

17 of 22

PRA Group gives investors good growth at a cheap price, but if the frivolous lawsuit holds up it could hurt the company’s ability to buy bad loans (but EPS would likely not be affected as it’s a one-time charge).
 
PRAA is ranked 17th in the 22 stock Growth Portfolio Power Rankings. It hasn’t been going up so I can’t put it in the Aggressive Growth Portfolio.
Aggressive Growth Portfolio

N/A

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