PRA Group (NASDAQ:PRAA)
has gone nowhere fast over the last two years, as the company has seen a
shift in the profitability of the charged-off debt it can buy and the
debt collection industry has continued to evolve. Management has also
added complexity, integration risk, forex risk, and regulatory risk to
the model in expanding into the European market through its acquisition
of Aktiv. Now add in an ongoing investigation from the CFPB that will almost certainly result in some sort of payout from the company.
Despite
that backdrop, I still think the shares are undervalued and that the
company's performance is starting to improve again. Amortization rates
are higher, recent purchases are performing well, and the quality of the
receivables looks good. From an industry perspective, there are still
reasons to believe that substantial volume could become available in the
next year or two and Aktiv offers sizable opportunities for capital
deployment. There are above-average risks inherent to this company's
model, but I believe fair value is in the mid-$60's to low-$70's today.
Follow this link for more:
Amidst Multiple Distractions, PRA Group Keeps On Collecting
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