Despite some strong quarterly results, PRA Group (PRAA) shares have gone nowhere fast this year, as investors remain more concerned about future growth prospects than excited about strong recent performance. This is understandable, to a point, but I do believe the Street is undervaluing the long-term value of meaningful efficiency improvements in the operations even if the future supply of collectable receivables is lower than previously hoped.
My fair value range on PRAA shares has been in the $40 - $46 range over my last two updates (here and here), and that's basically still the case, as model refinements narrow that valuation range to $41 to $45. A faster pace of purchasing would likely be the best source of near-term upside, followed closely by an even better sustained trend of cash operating costs, while a return to more activity in legal-channel collections and bankruptcies may not be as well-received by the Street.
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