More Mixed Numbers From PRA Group

Every company/stock has a “hassle factor” attached, and I’m increasingly wondering if PRA Group (PRAA) is worth that hassle factor. The nature of the business of buying charged-off debt and then collecting on it makes for complicated modeling and sometimes-confusing reports, but the underlying takeaway is pretty simple – PRA Group just doesn’t seem to be doing it as profitably as they used to, and I’m not sure the operating environment is going to get all that much better.

There are certainly are some things that could go well for PRA Group. I believe recent purchase should have higher yields than the generation right before it, and the company’s efforts to scale up legal collections and build up its call centers is a “pay today, profit tomorrow” sort of trade-off. Although I can see upside into high $30’s to low $40’s if things go well, I’m increasingly concerned that PRA may not have as much room to improve margins as I previously believed and that the potential gains may not be worth the headaches involved.

Read the full article here:
More Mixed Numbers From PRA Group