Portfolio Recovery Associates (Nasdaq: PRAA) is a good business in a much-maligned industry — debt collection. Got too funky with the Visa card at Amazon.com or Home Depot and can’t pay your bills? Consumer debt like that is bought and sold in this country, and firms such as Portfolio Recovery profit by buying low and collecting a few more pennies on the dollar than they paid. It’s not a sexy biz, and it isn’t well-followed. But it’s profitable and — judging by the behavior of our fellow American spendaholics — likely to continue to grow, which is why Rex Moore made it a pick for Hidden Gems a while back.
Recent financial results show the small firm chugging along nicely even in the face of stiff competition from competitors such as Encore Capital Group (Nasdaq: ECPG) and NCO Group (Nasdaq: NCOG). For the third quarter, Portfolio Recovery’s revenues were up 28% to $28.3 million. The bottom line was 26% growth in earnings per share, coming to $0.44 a stub. There wasn’t much else for shareholders to cheer. Collections per hour for the quarter were flat, though they’re up so far this year.
After last night’s earnings report, investors sent the stock down about 7% today, possibly because of a slowing pace of accumulation of debt portfolios for collection. The fear is that without influxes of fresh debt, growth may slow down. That’s a valid concern, but management’s explanation — that the prices just weren’t right — is equally important.
For this complete story, please visit PRAA: Pennies on the Dollar.
