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Why Rent-A-Center Stock Is Rallying Today

By Matthew DiLallo - Dec 21, 2020 at 11:29AM

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The lease-to-own provider is bulking up its business.

What happened

Shares of Rent-A-Center ( RCII 6.53% ) jumped more than 10% by 10:45 p.m. EST on Monday. Driving up the stock of the lease-to-own provider was the expansion of its fintech platform via the acquisition of Acima. 

So what

Rent-A-Center is paying $1.65 billion in cash and stock to acquire Acima, a leading virtual lease-to-own solution provider. Acima operates in more than 15,000 active retail partner locations and e-commerce platforms. The company is on track to generate $1.25 billion of revenue and $225 million of adjusted EBITDA in 2020, which is a significant increase from 2016 when it only produced $97 million in revenue. The deal will boost Rent-A-Center's pro forma numbers to $4.1 billion in revenue and $540 million in adjusted EBITDA. 

Businessmen shaking hands with arrows pointing upward overtop.

Image source: Getty Images.

The combination with Acima will expand Rent-A-Center's position as a leader in both the virtual and traditional lease-to-own segments. It should improve the company's long-term outlook for revenue, profitability, and cash flow growth. 

Now what

Rent-A-Center is acquiring a fast-growing fintech platform. The company anticipates that the deal will allow it to grow faster, increase its virtual partner base, and help more financially constrained customers with the flexibility of lease-to-own financing options. That potential ability to accelerate its growth by expanding its fintech platform makes Rent-A-Center stock worth a closer look.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Rent-A-Center, Inc. Stock Quote
Rent-A-Center, Inc.
$50.28 (6.53%) $3.08

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