Strong execution has done no favors for the shares of PRA Group (PRAA). The shares are basically flat since my last update on the company, despite a good quarter, as the Street remains concerned about the sustainability of collections and margins, as well as the diminishing outlook for a surge in quality charged-off paper over the next year or two. Moreover, I suspect that investors are concerned about the growing significance of the European operations, as this segment was slower to get up to speed and still carries some weight from that.
Supply issues do concern me, but I believe that is outweighed by the undervaluation in the shares today. I expect core earnings and FCF growth in the range of 6% to 8% over the next decade, with both supporting a fair value in the $41 to $46 range. The biggest catalyst for the shares would likely be a meaningful improvement in the acquisition of charged-off receivables.
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PRA Group Shares Still Waiting On Questions Of Sustainability And Supply
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