Estimates for PRA Group Inc. (PRAA - Free Report) have been revised upward over the past 30 days, reflecting brokers’ confidence in the stock. The stock has seen the Zacks Consensus Estimate of $1.94 for 2018 and $2.67 for 2019 move north by 3.6% and 3.4%, respectively.
PRA Group is a financial and business services company, engaged in purchase, collection and management of portfolios of nonperforming loans in the Americas and Europe. Shares of this Zacks Rank #3 (Hold) company have rallied nearly 13.6% in the past year, outperforming the industry’s growth of 5.3%.
Now let’s quickly take a look at the factors that make PRA Group stock an investor favorite.
Solid Acquisition Strategies: The company is currently well-positioned by dint of solid acquisition strategies and alliances. It has expanded and entered the domain of government collection, audit services. PRA Group’s 2016 acquisition of eGov Systems has strengthened its business in the government sector. Moreover, the company’s partnership with Internal Revenue Service in 2017 has also benefited the company. These acquisitions should aid overall growth.
Increasing Fee Income: The fee-for-service business has been consistently performing well since the second quarter of 2012. This was primarily driven by the fee income from the U.K. business, buyout of Mackenzie Hall and increased revenues from PRA Government Services. The fee incomes of $5 million plunged 45.9% in the first quarter of 2018 due to the sale of two fee-based subsidiaries. However, the company’s solid strategies and other fundamentals are likely to help increase its revenues going forward.
Rising Receivable Income: The company witnessed a rising graph in receivable income since 2009 except for 2016. However, the same rose by 12% in the first quarter of 2018, fueled by yield improvements on certain pools in Europe and Americas Core plus record portfolio purchases across the Americas in 2017.
Liquidity: The company enjoys an impressive liquidity position, conducive to effective capital deployment. Its cash and cash equivalents have been rising since 2013. Even during the first quarter, the cash and cash equivalents rose around 24% year over year.
Improving Cash Collections: In the first quarter of 2018, PRA Group’s cash collection rose 12% year over year to $426.6 million, driven by U.S. call center as well as European core growth. Moreover, the core cash collections in Europe mark the second record-breaking quarter. The company expects cash collections to grow in the upcoming quarters based on the purchase volume growth in collector base and productivity, considering the relatively favorable macro environment for collections.
Stocks to Consider
Investors interested in the Miscellaneous Services industry might take a look at the stocks of Houlihan Lokey, Inc. (HLI - Free Report) , FedNat Holding Company (FNHC - Free Report) and Financial Engines, Inc. . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Houlihan is an investment banking company, providing merger and acquisition (M&A), financing, financial restructuring and financial advisory services across the world. It holds a Zacks Rank #2 (Buy) and came up with an average four-quarter positive surprise of 20.84%.
Federated National and its units engage in insurance underwriting, distribution and claims processing business in the United States. With a Zacks Rank of 2, the company pulled off an average four-quarter earnings surprise of 23.03%.
Financial Engines offers independent technology-enabled financial advisory, discretionary portfolio management, personalized investment advice, financial and retirement income planning plus financial education and guidance services in the United States. The stock is a Zacks #2 Ranked player and delivered an average four-quarter beat of 2.96%.
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