Why Portfolio Recovery Shares Are Soaring

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: Investors were repossessing shares of Portfolio Recovery Associates (Nasdaq: PRAA  ) today, sending the financial services company up 15% on a strong earnings report.

So what: Portfolio Recovery, which specializes in debt collection, sped past EPS estimates of $1.64, posting $1.87 for the quarter while revenue jumped 29% to $148 million, also ahead of estimates. Cash collections grew in all segments, and the company set a quarterly record in portfolio acquisitions as well, a key driver of new business. The firm was also able to repurchase 300,849 shares at an average price of $68.62, significantly below the $98 it sits at today, helping to pump earnings per share. No guidance was issued.

Now what: Because of the nature of its business, Portfolio Recovery could be one of the few companies that actually benefit from a slowdown in the economy. The way it sees things, the more distressed debt in the world, the better. With a clean balance sheet, solid future growth, and an average valuation, this looks like a great bet going forward.

Want to stay covered on Portfolio Recovery?

Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool owns shares of Portfolio Recovery Associates. Motley Fool newsletter services have recommended buying shares of Portfolio Recovery Associates. Motley Fool newsletter services have recommended writing puts on Portfolio Recovery Associates. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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