Why Portfolio Recovery Associates Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Portfolio Recovery Associates (Nasdaq: PRAA  ) , a company that collects and manages portfolios of defaulted consumer receivables (as its name implies), spiked 10.5% earlier in the trading day after reporting better-than-expected first-quarter results.

So what: For the quarter, Portfolio Recovery highlighted a 25% jump in revenue to $140.1 million due to 31% increase in cash collections. Overall profit clocked in at $1.47, 10% higher than the year earlier. This compared favorably to Wall Street's EPS estimate of just $1.32 with revenue also coming in higher than expected. The biggest boost to the company's bottom line was its move into legal collections, which saw cash collections increase by 42% over last year.

Now what: No one likes a debt collector, but collection management services often make for very sound businesses. With a five-year expected growth rate of 14% and the company trading at just nine times forward earnings, it's not unreasonable to expect that its stock could continue to head higher.

Craving more input? Start by adding Portfolio Recovery Associates to your free and personalized watchlist so you can keep up on the latest news with the stock.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Portfolio Recovery Associates. Motley Fool newsletter services have recommended buying shares of, and writing puts on, Portfolio Recovery Associates. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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