Stock (Symbol) |
PRA Group (PRAA) |
Stock Price |
$32 |
Sector |
| Finance |
Data is as of |
| January 10, 2016 |
Expected to Report |
| Feb 29 – Mar 4 |
Company Description |
 PRA Group Inc. (PRA Group) formerly Portfolio Recovery Associates Inc. and its subsidiaries is a financial and business service company. The Company’s primary business is the purchase collection and management of portfolios of defaulted consumer receivables. These are the unpaid obligations of individuals to credit originators which include banks credit unions consumer and auto finance companies and retail merchants. The Company also provides feebased services including vehicle location skip tracing and collateral recovery services for auto lenders Governments and law enforcement through PRA Location Services LLC (PLS) revenue administration audit and debt discovery or recovery services for local Government entities through PRA Government Services LLC and MuniServices LLC (PGS) and class action claims recovery services and related payment processing through Claims Compensation Bureau LLC. Source: Thomson Financial |
Sharek’s Take |
 PRA Group (PRAA) is the largest truly global acquirer of non-performing loans in the world. It purchases bad consumer debt, then contacts the people and negotiates a lower with the person to get a portion of the debt paid. PRA always invests for the long-term, and its long-term track record of growing profits 20% per year, but has gotten hammered from $63 to $37 as its missed earnings estimates the last 2 qtrs. 2 qtrs ago PRAA missed earnings estimates of $1.15 by 9 cents, had 22% profit growth, 20% sales growth, cash collections grew 22% and the stock dropped from $64 to $56. Last qtr PRA missed the $1.17 estimate by 18 cents, had -12% profit growth, -4% sales growth, 2% cash collection growth, and stock fell from $54 to $45. PRA is dealing with a US government which is more liberal towards consumer rights, and also a strong dollar which hurts the European business. But with the stock selling for 7x earnings PRAA seems too low to sell, and I’m anxious for next qtr’s results as profit growth is expected to clock in at 13%. Longer term, if business is sound, the stock has the ability to double by 2017. |
One Year Chart |
 Terrible looking one-year chart, stock makes me think investing in small or mid size stocks is a waste of time and money due to the heightened risk. PRA acquired debt company Aktiv Kapital in 2014 which boosted the portfolio in Europe, but that has come with foreign exchange issues. Profits growth is expected to be 13%, -3%, 11% and 17% the next 4 qtrs, but the company has missed the last 2 qtrs. Still, at 7x earnings the stock seems too low. |
Fair Value |
 Although PRA is dealing with some issues, profit growth is still expected to climb in 2015, 2016 and 2017. My Fair Value is 12x earnings, or $57 a share. 2017’s Fair Value of $63 might seem high, but the stock had a median price of $56 last year. |
Bottom Line |
 PRA Group has grown consistently the last decade outside the 2008-2009 recession. With profit growth averaging 19% the last ten years, the stock growth of 7% a year seems low. PRAA is dealing with a strong dollar, and a liberal US government, but I feel the company will rebound next qtr with better results. At 7x earnings, the stock seems cheap and has huge upside. PRAA ranks 35th of 35 stocks in the Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
35th of 35Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
