World Acceptance Corporation

World Acceptance Corporation (WRLD) recently reported a record fiscal third quarter as loan volumes rose. The stock is cheap. WRLD trades at just 8.6x forward earnings.

Company Description

World Acceptance provides short-term small loans, medium-term larger loans, credit insurance products and other services to individuals. The company operates 945 offices in 11 states and Mexico.

During fiscal 2009, the company loaned $1.9 billion in 1.9 million transactions. The majority of the loans were under $3,000 and had maturities of less than 24 months. The average gross loan made in fiscal 2009 was $1,011 with an average contractual maturity of 11 months.

World Acceptance also operates ParaData Financial Systems, a provider of computer software for the financial industry. It is used in 1,465 consumer loan offices.

World Acceptance Posts Record Results for the Fiscal Third Quarter

On Jan 28, World Acceptance kept its earnings surprise streak going as it easily beat the Zacks Consensus by 30.30%. It posted record results. Earnings per share were 86 cents compared to the Zacks Consensus of 66 cents. This was up from 54 cents reported in the third quarter of last year.

Revenue rose 13.3% to $112.3 million from $99.2 million in the year ago quarter. The growth was the result of a 13.7% increase in average net loans compared to a year ago.

Gross loans outstanding climbed 13.9% to a record high of $838.9 million from $736.2 million in the third quarter of fiscal 2009. Loan volume rose at existing offices and offices opened since last year.

Loan loss provision increased by 0.5% to $29.6 million from $29.5 million in the year ago period. Net charge-offs equaled 17.8% of average net loans on an annualized basis, down from 19.6% in the third quarter of fiscal 2009. Delinquencies 61+ days past due also decreased by 30 basis points on both a recency and contractual basis to 3.0% and 4.3%.

The lower loss ratios are still higher than the company's historical rates even though it has shown improvement. World Acceptance said it had no way of knowing when it would return to its historical rates which are higher due to the recession. The company believes its current reserves are adequate at the current loss levels.

Zacks Consensus Estimates Rise

Analysts are still revising their estimates for the fourth quarter and fiscal 2010.

But in the last week, the fourth quarter Zacks Consensus has risen a penny to $1.78 per share.

For fiscal 2010, the Zacks Consensus climbed 8 cents to $4.39 with one estimate rising in the last 7 days. Analysts expect 18.97% earnings growth in fiscal 2010.

Value Fundamentals

World Acceptance is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 1.76. World Acceptance also has an outstanding 5-year average return on equity (ROE) of 21.41%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

Read the full analyst report on WRLD