PRA Group (PRAA) looks a lot like a story of two drivers right now – one good, one not so good. On the good side, PRA Group has done exceptionally well in terms of its operating efficiency, and while 2022 likely can’t match 2021 levels, improving efficiency is still positive over the long term. The not-so-good driver is the supply of new receivables for PRA to collect; management isn’t going to compromise on quality, but the stock really needs to see sustained supply improvements and a better outlook for collections and revenue growth.
PRA Group shares have done alright since my last update, rising about 15%, but continuing to underperform its only publicly-traded comp Encore Capital (ECPG). With around 10% undervaluation today, these shares are still worth a look, but I believe the company really needs to accelerate revenue growth to close that performance gap with Encore Capital.
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PRA Group Undervalued, But Needs More Collections Growth To Augment Efficiency
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