Earnings momentum for
Encore Capital Group, Inc.
) has been advancing since this debt service provider posted robust
second quarter results in early August. Now, this Zacks #2 Rank
(Buy) is scheduled to announce third-quarter results at the end of
the month, having beaten earnings expectations in three out of the
last four quarters. In addition, ECPG hit its 52-week high on
September 18 and has a P/B ratio of just 1.7, making it an
attractive value pick.
Encore Capital is expected to release third quarter earnings on
October 29. The Zacks Consensus Estimates are for 79 cents per
share on revenue of $144.0 million.
On August 2, Encore Capital Group announced second-quarter earnings
per share of 82 cents, beating the Zacks Consensus Estimate of 71
cents by 15.5% and last year's earnings of 58 cents by 41.4%.
Results improved mainly due to a boost in the top line, partially
offset by higher operating expenses.
Total revenue surged 27% year-over-year to $141.1 million.
Nevertheless, total operating expenses on an adjusted basis rose
19% to $95.0 million on the back of higher salaries and employee
benefits expense. Furthermore, EBITDA on an adjusted basis
increased 28% from the prior-year quarter to $147.9 million.
As of June 30, 2012, Encore Capital Group's total assets were $1.2
billion and cash and cash equivalents stood at $15.0 million.
Earnings Momentum Advances
Over the last 60 days, the Zacks Consensus Estimate for 2012
improved 3.3% to $3.13 per share, implying year-over-year growth of
32.2%. For 2013, the Zacks Consensus Estimate rose 1.1% to $3.64
over the same time frame, representing year-over-year growth of
Along with a low P/B ratio, Encore Capital Group has a forward P/E
multiple as low as 8.7 (a P/E ratio under 15.0 and a P/B ratio
below 3.0 generally indicate value). The company has a trailing
12-month ROE of 18.8%, in line with the peer group average.
Moreover, given the long-term growth projection of 15.5%, the PEG
ratio comes in at 0.58, a 42.0% discount to the benchmark of 1 for
a fairly priced stock. Thus, the expected long-term earnings growth
is currently priced at a discount.
Based in San Diego, California, Encore Capital is the provider of
debt management and recovery solutions to consumers and property
owners across a broad range of assets through its subsidiaries. The
company purchases portfolios of defaulted customers' receivables at
steep discounts and uses a wide range of operational channels to
maximize the collections from the portfolios. With a market
capitalization of roughly $692.6 million, Encore Capital competes
with Credit Acceptance Corp. (
) and Regional Management Corp. (
), among others.
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades are
about to be triggered and which of our experts has the hottest
hand. Then each week he hand-selects the most compelling trades and
serves them up to you in a new program called
ENCORE CAP GRP (ECPG): Free Stock Analysis
To read this article on Zacks.com click here.