Zacks Investment Research upgraded
Portfolio Recovery Associates Inc.
) to a Zacks Rank #1 (Strong Buy) on Dec 31, 2013.
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Why the Upgrade?
Portfolio Recovery witnessed upward estimate revisions on the
back of solid earnings results. This full-service provider of
outsourced receivables management delivered positive earnings
surprises in the last 4 quarters with an average beat of 11.4%.
Over the last 60 days, most of the estimates moved north to raise
the Zacks Consensus Estimate by 2.4% to $3.45 per share
(representing a year-over-year improvement of 40.1%). The Zacks
Consensus Estimate for 2014 also increased 1% to $3.89
(representing a year-over-year improvement of 12.9%) over the
same time frame.
The expected long term growth rate for the stock is 16%.
In the last reported quarter, Portfolio Recovery's operating
earnings per share came in at $1.02, surpassing the Zacks
Consensus Estimate by 16%. The earnings also improved 57% year
over year. Earnings were primarily driven by a surge in revenues,
which was attributable to the continuous improvement in income
from finance receivables. Renewed emphasis on the fee-for-service
businesses also aided the third-quarter upside. The top line also
fared well on both counts, driven by higher cash receipts.
Although operating expenses increased during the quarter, the
increase in operating income countered the rise in expenses,
leading to an improvement in operating margin.
Portfolio Recovery also went in for a 3:1 stock split in the
third quarter to make its shares more affordable. Valuation looks
attractive for Portfolio Recovery. The shares are trading at a
discount to the peer group average, on forward price-to-earnings
basis, with return on equity remaining 37.4% above the peer group
average. Moreover, a strong financial position enables Portfolio
Recovery to engage in debt repayment and share repurchases,
thereby enhancing investor confidence.
Portfolio Recovery is scheduled to release its fourth-quarter
2013 results in the second week of Feb 2014. The Zacks Consensus
Estimate for the quarter is pegged at 89 cents per share,
translating into a year-over-year improvement of 27.7%.
Other Stocks to Consider
Other players in the financial services industry which look
attractive at current levels include
DFC Global Corp.
Blackhawk Network Holdings, Inc.
Financial Engines, Inc.
). All these stocks carry a Zacks Rank #2 (Buy).