Monday, May 11, 2015

Seeking Alpha: Amidst Multiple Distractions, PRA Group Keeps On Collecting

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.

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Amidst Multiple Distractions, PRA Group Keeps On Collecting

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