PRA (US:PRAA) ZACKS·2024-09-12 19:25Core Viewpoint - PRA Group, Inc. is positioned for growth due to increased portfolio purchases, improved pricing in the U.S., and enhanced cash collections [1][5] Company Overview - PRA Group is a global financial services company with a market cap of $797.4 million, focusing on the acquisition, collection, and management of nonperforming loans [2] - The company's shares have increased by 2% over the past three months, while the industry has grown by 7.6% [2] Financial Performance - The Zacks Consensus Estimate for PRA Group's 2024 earnings indicates a more than onefold improvement, with upward revisions reflecting positive analyst sentiment [3] - The consensus estimate for 2024 revenues is $1.1 billion, representing a 33.8% year-over-year increase [4] Growth Prospects - PRA Group is expected to benefit from improving portfolio supply and pricing in the U.S. amid credit normalization, which is a key factor for anticipated growth [5] - Rising credit card balances and higher delinquency rates are expected to increase supply in the U.S., while cash collection growth in Europe is also promising [6] Portfolio Acquisitions - In Q2, PRA Group acquired non-performing loan portfolios totaling $379.4 million, with total purchases in 2023 reaching $1.2 billion, a 36% increase year-over-year [7] Operational Efficiency - The company anticipates a cash efficiency ratio of around 60% in 2024, up from 58% in 2023, indicating improved cash management [8] Valuation Metrics - PRA Group's forward 12-month price-to-earnings ratio is 11.21X, lower than the industry average of 13.66X, suggesting the stock is more affordable [8] Challenges - The company's total debt to total capital ratio stands at 72.9%, significantly higher than the industry average of 56.3%, leading to increased interest expenses [9] - Rising legal collection costs and agency fees have negatively impacted margins, with increases of 36.3% and 16.2% year-over-year, respectively, in the first half of 2024 [9]