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Why Should You Retain PRA Group (PRAA) in Your Portfolio?

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PRA Group, Inc. (PRAA - Free Report) has been in investors’ good books on the back of its receivable income and strategic measures.

It retained investors' bullish sentiment by maintaining its beat streak in all the last four quarters, the average being 38.8%. This upside further underlines its operational excellence.

Over the past 60 days, the stock has witnessed its 2020 and 2021 earnings estimates move north 23% and 7.8%, respectively.

The company is well-poised for progress, evident from its favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

The company’s receivable income has been increasing since 2009 (except 2016). In 2019, the same grew 12% year over year on the back of Americas Core purchase in 2018 and robust results delivered by select Americas Core plus Europe Core portfolios. Subsequent to changes made in the income statement upon the implementation of CECL, the company reported a portfolio income of $510.3 million in the first six months of 2020, which benefited from improved purchasing and a strong operational excellence. Further, the portfolio income compared favorably with income recognized from finance receivables in the prior-year quarter. Notably, PRA Group expects expanded portfolio volumes in 2020 despite the COVID-19-induced turmoil.

PRA Group took its presence beyond primary debt collection business and stepped into government collections and audit services. PRA Group also bought the holding company of Resurgent Holdings LLC's Canadian business in March 2019, which has created an advanced nonperforming loan business in Canada. In the first six months of 2020, the company spent a total of $597.9 million on its acquisitions of finance receivables. All these moves bode well for the company’s inorganic growth.

The company’s cash collection rose 7.4% and 13.3% year over year in 2018 and 2019, respectively. This trend continued in the first six months of 2020 with total cash collections climbing 7.8% from the figure reported in the prior-year quarter. This upside was mainly driven by U.S. call center and other collections. We expect the momentum to continue on the back of purchase volumes, growth in collector base and productivity.

Recently, the company also enhanced its financial flexibility by extending and amending its North American credit facility on Aug 26, 2020. It boosted the total term amount to $475 million by adding a term loan from particular lenders in an aggregate principal amount of $55 million. Per management, the extension and amendment to the company’s credit facilities will substantially strengthen its financial standing by allowing it to make the most of investment opportunities.

The Zacks Consensus Estimate for current-year earnings is pegged at $3, indicating a rise of 58.7% from the prior-year reported number.

Shares of this currently Zacks Rank #3 (Hold) company have gained 13.5% in a year’s time against its industry’s decline of 7.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



The price performance looks stellar against other companies’ stock movements in the same space, such as Euronet Worldwide, Inc. (EEFT - Free Report) , TCG BDC Inc. (CGBD - Free Report) and CURO Group Holdings Corp. , which have lost 40.1%, 24.5% and 47.2%, respectively, in the same time frame.

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