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

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PRA Group, Inc. (PRAA - Free Report) is in investors’ good books owing to its strong European cash collections, a diversified footprint and robust portfolio. PRAA has also been gaining from increasing consumer spend and solid volumes for a while. This financial transaction services provider’s receivable income is another highlight.

Headquartered in Norfolk, VA, and incorporated in Delaware, PRA Group witnessed robust purchase volumes in 2019 and 2020. The trend continues this year with PRAA enjoying meaty volumes.

PRAA boasts an impressive surprise record, beating on earnings in three of the trailing four quarters (while missing the mark in one), the average beat being 32.13%.

Let’s analyze the factors that make this currently Zacks Rank #3 (Hold) stock a compelling choice for investors right now. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The miscellaneous financial services provider’s receivable income has been rising since 2009 (except in 2016). Its total revenues increased 4.8% in 2020 and 6% in the first nine months of 2021, both on a year-over-year basis. PRAA’s strong capital position makes it optimistic about a projected rise in purchasing volume next year.

PRAA’s cash collection increased over many quarters owing to Europe Core and Europe Insolvency. The metric rose 4.2% year over year in the first nine months of 2021. We expect the momentum to continue on the back of volume of purchases in the United States that will increase later in 2021 or early 2022.
PRA Group also ventured into government collections and audit services.

PRAA’s acquisition of eGov Systems in 2016 to consolidate government business as well as its alliances with the Internal Revenue Service and Banco Bradesco S.A. are some of its notable initiatives. In March 2019, PRAA purchased the holding company of Resurgent Holdings LLC's Canadian business to create an advanced nonperforming loan business in Canada.
In 2020 and during the first nine months of 2021, PRA Group spent $905.1 million and $770.5 million, respectively, on portfolio acquisitions.

PRAA has a strong capital position with $1.4 billion available for portfolio investment at the end of the third quarter of 2021.

Despite the current economic volatility, this financial services player has continued its capital-deployment activities. In the third quarter, it repurchased shares worth $74 million. The board of directors recently approved its share buyback plan by an additional $80 million. PRAA’s disciplined capital management helped instill investors’ confidence in the stock.

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

The Zacks Consensus Estimate for PRAA’s 2021 earnings indicates an improvement of 19.63% from the year-ago reported figure.

In the past six months, shares of PRAA have gained 12.3% against its industry's fall of 2%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the same space are  Credit Acceptance Corporation  (CACC - Free Report) ,  HoulihanLokey, Inc.  (HLI - Free Report) and  Virtu Financial, Inc. (VIRT - Free Report) . While HoulihanLokey sports a Zacks Rank #1, Credit Acceptance and Virtu Financial hold a Zacks Rank #2 (Buy at present).

Headquartered in Southfield, MI, Credit Acceptance Corporation is a credit services company. CACC managed to deliver a trailing four-quarter earnings surprise of 38.86%, on average.

Houlihan Lokey is an investment bank focusing on mergers and acquisitions, financings, financial restructurings and financial advisory services. HLI’s earnings managed to beat estimates in all the trailing four quarters, the average being 39.53%.

Headquartered in New York, NY, Virtu Financial is a market-leading financial services firm that leverages cutting-edge technology to provide execution services and data, analytics and connectivity products to its clients and deliver liquidity to the global markets. VIRT came up with a trailing four-quarter surprise of 25.34%, on average.

Shares of Credit Acceptance Corporation, Houlihan Lokey and Virtu Financial have gained 98.7%, 56.6% and 18.9%, respectively, in the past six months.