Why World Acceptance Corp. Shares Jumped

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 World Acceptance (NASDAQ: WRLD  ) , a credit services company that provides short-term and medium-term consumer loans, as well as income tax preparation and filing services, jumped by as much as 13% after reporting its third-quarter-earnings results before the opening bell.

So what: For the quarter, World Acceptance delivered a 7% increase in total revenue to $160.5 million as EPS advanced 25% to $1.98. Comparatively speaking, Wall Street had been looking for just $1.75 in quarterly EPS (so this was quite a thumping), but revenue came in about $1.9 million short of the consensus estimate. World Acceptance's CEO, Sandy McLean, notes that state law changes in Texas, Georgia, and Indiana helped improve interest and fee income during the quarter, while an aggressive share repurchase program boosted the company's bottom line. Furthermore, gross loans outstanding increased by 7% to $1.26 billion as of Dec. 31, 2013.

Now what: It can always be a little bit of an adventure come earnings season for World Acceptance, with the company having missed estimates in three of the previous four quarters. Generally speaking, though, this was a decent report with gross loans rising and its return on average equity rising 400 basis points to 30% from the year-ago period. One factor investors may want to keep their eyes on, though, is the number of consumers who are delinquent on their loans by 61 or more days. This figure rose from 4.3% to 5% over the past year and required World Acceptance to boost its loan loss provision by 10% in the third quarter. If rising delinquencies becomes a trend, even World Acceptance's single-digit P/E wouldn't be enough to entice me to buy.

World Acceptance may be soaring today, but it could have a hard time keeping up with our top stock for 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 29, 2014, at 6:23 AM, AnsgarJohn wrote:

    Interesting that this is a 1 star company in CAPS due to a Citron report in 2009 when the stock was trading at $18.

    World Acceptance is an (unethical) money making machine, taxing the poor, just like lotteries.

    Not bad for shareholders though.

Add your comment.

DocumentId: 2813292, ~/Articles/ArticleHandler.aspx, 4/17/2014 9:09:57 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement