What happened
Shares of World Acceptance Corp. (WRLD +4.76%) are rising about 29% as of 2:00 p.m. EDT after the company reported better-than-anticipated results during its fiscal fourth quarter.
So what
World Acceptance Corp. reported that net income rose to $31.9 million, or $3.64 per diluted share, during the fiscal fourth quarter, up from $29.8 million and $3.42 in diluted earnings per share a year ago. Earnings were elevated partially due to an increase in seasonal tax prep business volume, which grew thanks to a 13% increase in volume and a 7% jump in pricing.
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Problematic loans took a smaller slice of profits this quarter. The company noted that provisions for loan losses decreased by $3.7 million compared to the year-ago period. Net charge-offs as a percentage of average loans also declined to an annualized basis of 15.4%, down from 18.9% a year ago.
Past-due loans were slightly elevated this quarter, as accounts 61 days past due increased to 7% on a contractual basis, up from 6.5% during the same quarter a year ago.
Changes to its business practices aren't having the impact on loan losses to the extent many were worried about. World Acceptance Corp. ceased in-person collection visits in December 2015, and loan losses grew in the quarters that followed. In prepared remarks for its conference call, the company pointed out that it is "pleased with our decision to end field calls in December 2015." It went on to say that "[t]he rise in the dollar value of charge-offs is only marginally above the cost savings we have experienced through the elimination of field calls."
Now what
Shares are now up more than 45% in less than two full trading days. Yesterday, the stock surged on news that an amendment to its credit agreement extended its maturity and allowed the company an avenue to make share repurchases.
On the conference call, Vice President and CFO John Calmes explained the capacity for share repurchases, stating that the repurchase capacity stands at about $36 million in the first quarter of 2018. If earnings in 2018 match 2017's, it would have about $57 million of capacity in the 2018 fiscal year.
Likely helping the company's multiday rally is an elevated level of short interest. As of April 13, the most recent date for which data is available, more than 1.8 million shares of stock, or approximately 21% of shares outstanding, were sold short. Short-sellers are likely covering to avoid getting squeezed by share repurchases, driving some of the stock's recent gains.
