Although shares of
) moved up slightly subsequent to the company's recent endeavor
toward expanding its U.K operations, it failed to retain the
momentum thereafter. On Feb 4, 2014, the company had announced the
buyout of the Individual Voluntary Arrangements (IVA) Master
Servicing Platform and other operating assets related with it from
Pamplona Capital Management, LLP (PCM).
The deal, to be closed before mid-2014, conforms to Portfolio
Recovery's business strengthening initiatives in the U.K.,
including the acquisition of U.K. consumer debt since 2012.
IVA is an alternative tool that allows individuals to evade
bankruptcy through a repayment proposal that is presented to
creditors by an insolvency practitioner. For quite some time now,
the U.S. bankruptcy operations of ProAssurance have significantly
contributed to the company's profits.
Now with the acquisition of PCM's assets the company counts to
establish this line of business in U.K. as well, so as to
accentuate overall profits going forward. The acquisition agreement
also entails the recruitment of the IVA management and analytical
team of PCM by Portfolio Recovery. With the help of the veteran
team of PCM, Portfolio Recovery will find it convenient to cater
efficiently to the U.K. consumer base.
Portfolio Recovery boasts a strong cash position that allows it to
undertake inorganic growth initiates like the one mentioned above.
However, the company has been witnessing mounting interest expenses
due to debt issuances for quite some time.
Escalating levels of expenses coupled with intense competition make
us skeptical about any near-term extraordinary performance. Thus,
we caution investors regarding the short-term prospects of the
stock and suggest holding it for the long run. Hence we have a
Zacks Rank #3 (Hold) on Portfolio Recovery.
However, investors interested in the financial services industry
may consider better-ranked stocks like
American Express Co.
Financial Engines, Inc.
Discover Financial Services
). All these stocks carry a Zacks Rank #2 (Buy).
(We are reissuing this article to correct a mistake. The
original article, issued yesterday, Thursday, February 6, 2014,
erroneously mentioned the company
]. This mention has been removed.)
PORTFOLIO RCVRY (PRAA): Free Stock Analysis
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