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PRA Group Gains 35.1% in a Year: Will the Rally Continue?

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PRA Group, Inc. (PRAA - Free Report) has been in investors’ good books owing to rising receivable income and expansion via buyouts.

In a year’s time, this Zacks Rank #1 (Strong Buy) has surged 35.1% against its industry's decline of 18.2%. Over the past 30 days, the stock has seen its 2019 and 2020 earnings estimates being revised 17% and 44.4% upward, respectively.

Its earnings managed to surpass the Zacks Consensus Estimate in three of the trailing four quarters, missing the same in one, the average beat being 10.6%.

Solid Performance in 2019

The company’s receivable income has been increasing since 2009 (except 2016). The rally continued in 2019 with the metric climbing 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, and a business buyout in Canada, during first-quarter 2019. We expect the company to continue delivering solid top-line results on the back of its receivable income.

Moreover, the company expanded its line of business and entered government collections as well as audit services. PRA Group 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, the company spent $1.3 billion on acquisitions of finance receivables.

The company’s cash collection has also been consistently rising over the past many years. In 2019, the metric rose 13.3% year over year on its U.S. legal collections, America’s Core, etc. We expect this trend to continue on the back of volume of purchases and growth in collector base.

Will the Rally Continue in 2020?

We expect the company to retain its consistency in performance, banking on higher revenues, impressive business mix and rising cash collection.

The company has an attractive Growth Score of B, which underlines its strong prospects.

For 2020, the Zacks Consensus Estimate for earnings stands at $3.64, hinting at 26% improvement from the year-earlier reported figure on revenues of $1.21 billion, which in turn, suggests an upside of 8.6% from the prior-year reported number.

Other Stocks to Consider

Investors interested in the finance sector might also consider some other top-ranked stocks like Houlihan Lokey, Inc. (HLI - Free Report) , AXA Equitable Holdings, Inc. (EQH - Free Report) and Cardtronics PLC , each carrying a Zacks Rank #2 (Buy).

Houlihan Lokey is an investment banking company that works as an online platform for small business lending. It delivered a positive earnings surprise of 17.1%, on average, over the preceding four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AXA Equitable Holdings works as a diversified financial services company. The company’s earnings beat estimates in all the trailing four quarters by 16.4%, on average.

Cardtronics offers automated consumer financial services and it came up with average four-quarter beat of 27.2%.

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