Seeking Alpha: Can Portfolio Recovery Associates Keep Up An Impressive Run?

Debt collectors are hardly popular, but the reality is that they fill a critical niche in the credit cycle and ultimately keep rates lower than they would otherwise be. Not surprisingly, the housing crunch and the resulting recession created a flood of defaulted receivables for Portfolio Recovery Associates (PRAA) to buy.

Now, though, delinquencies are falling and U.S. households continue to deleverage. Can Portfolio Recovery continue to thrive by expanding its operations in areas like legal collections and bankruptcy and by out-executing the competition with better pricing discipline and operational excellence?

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Can Portfolio Recovery Associates Keep Up An Impressive Run?

Seeking Alpha: Steady As She Goes At Portfolio Recovery Associates

When it comes to buying charged-off debts and then trying to collect them, surprises are seldom ever a good thing. So it's probably just as well that Portfolio Recovery Associates (PRAA) offered few surprises this quarter. This company is always going to be controversial - the accounting is confusing for those unaccustomed to it, the IRS is investigating the company's tax calculation policies, there's more regulation and oversight coming, and it's an inherently difficult thing to collect on debt.

All of that said, PRAA is one of the best at what it does and there's more than enough room for the company to continue growing.

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Steady As She Goes At Portfolio Recovery Associates

Seeking Alpha: Unsavory Business And Murky Accounting Undervalue Portfolio Recovery

At the risk of climbing on a soapbox, isn't it interesting how people generally expect others to honor their obligations to them, but they get quite resentful when they are held to account on their own obligations? Portfolio Recovery Associates (Nasdaq: PRAA) is the largest publicly traded pure-play in a very unsavory business – debt collection. Not only does PRA have to contend with trying to get money from people who either cannot or do not want to pay, but the company is further burdened with an ever-shifting legal, legislative, and accounting environment. Perhaps it's little wonder then that these shares look quite cheap.

A Vital, But Disliked, Link In The Credit Chain
The availability of capital is predicated on the idea that lenders get their money back and/or can avail themselves of legal remedies to secure repayment. If borrowers are allowed to default and walk away too easily, the price of money shoots up and the availability drops. To that end, Portfolio Recovery occupies an important niche in the credit chain – PRAA buys up receivables that creditors could not not collect, takes the risk upon itself, and profits if it can be more successful in securing repayment.

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Unsavory Business And Murky Accounting Undervalue Portfolio Recovery