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.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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