Recently, the board of Portfolio Recovery Associates
Inc. ( PRAA ) approved a 3:1
stock split, which will be conducted on or around Aug 1, 2013. The
stock split will be structured as a stock dividend, to be paid to
shareholders of record as of Jul 1, 2013.
Consequently, the eligible shareholders will receive two shares
for every Portfolio Recovery share held by them. This is the first
stock split being implemented by the company, which went public in
Portfolio Recovery had around 17 million shares outstanding as
of Mar 31, 2013, amounting to shareholder equity of $0.17 million.
Thus, after the stock split, the company will have about 51 million
outstanding shares. However, the shareholder equity will remain
unaffected by the split.
Further, as a result of the increase in the number of
outstanding shares, the earnings per share of Portfolio Recovery
will fall. Nevertheless, this fall does not indicate any weakness
in the company's earnings, as the total earnings as well as the
fundamental strength of the company remains the same.
However, the stock split will reduce the price per share, thus
making the shares of Portfolio Recovery more affordable. As a
result, a larger number of potential investors will be able to buy
the shares. Moreover, with a fall in prices, the bid-ask spread
will also reduce. Based on these factors, the liquidity of the
shares will increase.
Portfolio Recovery carries a Zacks Rank #2 (Buy). Other
companies in the business services sector that are worth
considering are Barrett Business Services Inc. (
BBSI ) - Zacks Rank
#1 (Strong Buy), Sykes Enterprises, Incorporated (
SYKE ) - Zacks Rank
#1 (Strong Buy) and Convergys Corporation ( CVG ) - Zacks Rank #2
(Buy).BARRETT BUS SVS (BBSI): Free Stock Analysis
ReportCONVERGYS CORP (CVG): Free Stock Analysis
ReportPORTFOLIO RCVRY (PRAA): Free Stock Analysis
ReportSYKES ENTRP INC (SYKE): Free Stock Analysis
ReportTo read this article on Zacks.com click here.Zacks Investment