Encore Capital Group, Inc. ECPG recently scaled up the size of its global senior secure revolving credit facility from $1.14 billion to $1.18 billion. Simultaneously, the maturity date of the facility was extended by a year from September 2026.
The latest move reflects ECPG’s sincere efforts to further solidify its balance sheet in order to boost liquidity position and financial flexibility. With no significant debt maturities until 2025, the credit facility can be leveraged to tap booming portfolio purchase opportunities and benefit from lucrative returns as well. The outstanding borrowings pursuant to its global senior facility stood at $752.1 million as of Mar 31, 2023.
As management remains optimistic about portfolio supply growth throughout the United States, the recent extension of the credit facility seems to be time opportune. Encore Capital had resorted to a facility upsize of $90 million in 2022 as well.
A favorable portfolio purchase environment bodes well since the primary line of business for ECPG remains to purchase defaulted consumer receivable portfolios at high discounts and subsequently, manage them to enable repayment of unpaid financial obligations to credit originators. This, in turn, is likely to boost the revenue generated from debt purchasing and recovery activities.
Encore Capital pursued portfolio purchases of $276 million in the first quarter of 2023, which surged 63% year over year and the majority contribution to the overall volume was a result of record purchases conducted in the United States. ECPG anticipates second-quarter 2023 U.S. portfolio purchases to stay close to the first-quarter 2023 level.
Apart from a strong revolving credit facility, Encore Capital boasts a growing cash balance that further substantiates the sound financial position of the international specialty finance company. As of Mar 31, 2023, cash and cash equivalents increased 10.3% from the 2022-end level.
Shares of Encore Capital have declined 6.4% year to date against the industry’s 0.4% growth. Nevertheless, its strong fundamentals are likely to help shares bounce back in the days ahead. ECPG currently carries a Zacks Rank #3 (Hold).
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Stocks to Consider
Some better-ranked stocks in the Finance space are Monroe Capital Corporation MRCC, EastGroup Properties, Inc. EGP and Portman Ridge Finance Corporation PTMN. While Monroe Capital currently sports a Zacks Rank #1 (Strong Buy), EastGroup Properties and Portman Ridge Finance carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The bottom line of Monroe Capital outpaced estimates in two of the trailing four quarters, matched the mark once and missed the same on the remaining one occasion, the average surprise being 5.85%. The Zacks Consensus Estimate for MRCC’s 2023 earnings suggests an improvement of 9.8% from the year-ago reported figure. The same for revenues suggests growth of 16.8% from the prior-year reported number. The consensus mark for MRCC’s 2023 earnings has moved 7.6% north in the past 30 days.
EastGroup Properties’ earnings outpaced estimates in three of the trailing four quarters and met the mark once, the average surprise being 1.29%. The Zacks Consensus Estimate for EGP’s 2023 earnings suggests an improvement of 7.7% from the year-ago reported figure. The same for revenues suggests growth of 13.2% from the prior-year tally. The consensus mark for EGP’s 2023 earnings has moved 1.3% north in the past 30 days.
The bottom line of Portman Ridge Finance outpaced estimates in two of the last four quarters and missed the mark twice, the average surprise being 5.70%. The Zacks Consensus Estimate for PTMN’s 2023 earnings suggests an improvement of 5.7% from the year-ago reported figure. The same for revenues suggests growth of 15.3% from the year-ago tally. The consensus mark for PTMN’s 2023 earnings has moved 3.2% north in the past seven days.
The EastGroup Properties stock has gained 9.4% year to date. However, shares of Monroe Capital and Portman Ridge Finance have declined 11% each in the same time frame.
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