Shares of Portfolio Recovery Associates
No business like repo business
Portfolio Recovery specializes in the "detection, collection, and processing of defaulted consumer receivables" so it shouldn't be a surprise to see this company thriving during the weak recovery. Its shares have gained more than 400% since bottoming in 2009 and have shot up over 50% in just the last four months as the chart below shows.
The debt recovery service has topped earnings estimates by more than 10% in its last two quarters, and shares jumped 17% on its latest report, which showed strong growth in all segments and a new record in portfolio acquisitions, a key driver of new business.
And PRA isn't the only debt recovery firm that's thrived over the last year, as the chart below indicates:
All four have gained 20% or more, with Asset Acceptance Capital
In this industry, savvy management would seem to be even more valuable than in most, as the above comparison helps demonstrate. Since these companies make their money by negotiating low prices for the receivables they buy and later collect on, the business boils down to management's ability to make smart financial decisions, and Portfolio Recovery's executives seem to have proven their skill.
PRA is the largest of these firms, with a market cap of $1.75 billion, and still sports a reasonable price-to-earnings ratio at 16. Near-term growth looks strong with analysts expecting a 20% increase in EPS for this year and next, and with the payroll tax increase expected and the fiscal cliff looming, it seems likely that distressed debt could increase in 2013, further fueling its business.
Our CAPS Community is also bullish on the stock, giving it 5 out of 5 stars, with 97% predicting it will continue to rise. Many have cited the poor economy and the company's solid financials as reasons to invest. As long as those conditions hold true, this stock should continue to move higher. Another financial stock that our CAPS members like was recently named "The Only Big Bank Built to Last." Find out why in our brand-new special free report that explains why this financial titan is avoiding risks the others aren't. The report can be yours today at no cost. All you have to do is click right here.
Fool contributor Jeremy Bowman holds no positions in the companies in this article. Motley Fool newsletter services have recommended buying shares of 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.