PRA Group, Inc. PRAA has been in investors’ good books owing to growing receivable income and expansion via buyouts.
In a year’s time, this Zacks Rank #2 (Buy) has surged 50%, outperforming its industry's growth of 24.5%. Over the past 60 days, the stock has seen its 2019 and 2020 earnings estimates being revised 5.3% and 2.5% upward, respectively.
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Its earnings managed to surpass the Zacks Consensus Estimate in three of the trailing four quarters, the average being 18.1%.
Solid Performance in 2019
The company’s receivable income has been increasing since 2009 (except 2016). The rally continued in the first nine months of 2019 as well with the metric climbing 11.3% year over year on the back of Americas Core purchase in 2018 and robust results delivered by select Americas Core plus Europe Core portfolios, recent increased portfolio acquisition in Europe and South America and a business buyout in Canada during first-quarter 2019.
Moreover, the company expanded its line of business, having entered government collections, audit services. PRA Group acquired the holding company of Resurgent Holdings LLC's Canadian business in March 2019, which is expected to create an advanced nonperforming loan business in Canada. In the first nine months of 2019, the company bought finance receivables portfolios at a face value of $8.9 billion.
Its cash collection rose 1.4% and 7.4% year over year in 2017 and 2018, respectively, primarily driven by better business in Americas Core and European Core. In the first nine months of 2019, the same ascended 13.3% year over year, mainly banking on the company’s U.S. legal collections, America’s Core, etc.
Will the Rally Continue in 2020?
We expect the company to consistently perform well on the back of higher revenues.
Cash collection is also likely to grow on volume of purchases, growth in collector base and productivity considering the relatively favorable macro environment for collections.
The company’s business mix and productivity improvement would also aid its growth.
Its March 2019 buyout of the holding company of Resurgent Holdings LLC's Canadian business is expected to create an advanced nonperforming loan business in Canada. The combined entity’s scale and efficiencies are expected to provide premium service and impressive liquidity to credit originators, who can boost their individual credit services. PRA Group’s ability to acquire and assimilate businesses in related fields is certainly a long-term positive as the traditional debt collection business matures and becomes more competitive.
The company has an impressive Growth Score of B, which underlines its growth prospects.
For 2020, the Zacks Consensus Estimate for earnings stands at $2.47, hinting at 37.2% improvement from the year-earlier reported figure.
Other Stocks to Consider
Investors interested in the finance sector might also consider some other top-ranked stocks like On Deck Capital, Inc. ONDK, AXA Equitable Holdings, Inc. EQH and Cardtronics PLC CATM.
On Deck Capital works as an online platform for small business lending in the United States, Canada and Australia. This Zacks #2 Ranked stock delivered a positive earnings surprise of 8.3% over the preceding four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AXA Equitable Holdings works as a diversified financial services company. The company’s earnings beat estimates in the trailing four quarters by 12.4%, on average. It holds a Zacks Rank of 2.
Cardtronics offers automated consumer financial services through its network of automated teller machines and multi-purpose financial services kiosks. The company came up with average four-quarter beat of 28.8% and flaunts a Zacks Rank of 1.
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