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

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PRA Group, Inc. (PRAA - Free Report) has been in investor’s good books on the back of its solid inorganic growth story and strong cash collections for a while now. Its well-positioned portfolio and receivable income are other highlights of the stock.

The stock carries a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all the three factors.

Over the past 60 days, the stock has witnessed its current-year earnings estimate move 19% north.

The company boasts an impressive surprise record, beating on earnings in all the trailing four quarters, the average being 44.61%.

Let’s analyze the factors that make this currently Zacks Rank #3 (Hold) stock a compelling choice for investors right now.

The miscellaneous financial services provider’s receivable income has been rising since 2009 (except in 2016). Its total revenues increased 4.8% and 9.8% year over year in 2020 and during the first half of 2021, respectively. Its strong capital position makes it optimistic about an expansion in the purchasing volume for next year.

PRA Group’s digital payment capabilities significantly contributed to its growth. It built new global digital payment portals and strengthened its global data and analytics capabilities.

Its strategic initiatives poise it well for growth. Its acquisition of eGov Systems in 2016 to consolidate government business as well as alliances with the Internal Revenue Service and Banco Bradesco S.A. are some of its notable initiatives. PRA Group also acquired the holding company of Resurgent Holdings LLC's Canadian business in March 2019, which is expected to create an advanced nonperforming loan business in Canada. Last year and during the first half of this year, the company spent $905.1 million and $378.6 million, respectively, on portfolio acquisitions.

PRAA Group’s cash collection has been improving for the past many quarters. In the early part of 2021, the same rose 9.5% year over year on the back of Europe Core, and higher U.S. call center and other collections, led by increased collections from the company’s digital platform. We expect this momentum to continue on the volume of purchases in the United States that will boost either later in 2021 or in early 2022.

The company’s board of directors authorized a $150-million share repurchase program to return capital to investors. It also extended its North American credit facility.

However, it has been grappling with escalating expenses over the past many years, which remains a concern.

The Zacks Consensus Estimate for the company’s 2021 earnings indicates an improvement of 23% from the year-ago reported figure.

In the past six months, shares of the company have gained 10.1%, outperforming its industry's growth of 8.3%.

Zacks Investment Research
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Stocks to Consider

Some better-ranked stocks in the same space are Credit Acceptance Corporation (CACC - Free Report) , HoulihanLokey, Inc. (HLI - Free Report) and CIT Group Inc. , each presently holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Credit Acceptance, HoulihanLokey and CIT Group have a trailing four-quarter earnings surprise of 65.4%, 38.33% and 224.59%, on average, respectively.
 

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