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Why Pra Group Inc Shares Plummeted

By Brian D. Pacampara, CFA – Feb 26, 2016 at 11:49AM

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The debt collector posts in-line Q4 results, but Wall Street sees more trouble ahead.

Image Source: PRA Group

What: Shares of bad-debt collector Pra Group Inc (PRAA -0.35%) were off 18.1% at 10:55 a.m. EST on Friday after its quarterly results disappointed Wall Street.

So what: Pra Group shares have plunged in recent months on signs of strong headwinds, and less-than-stellar Q4 results -- EPS of $1.03 met expectations on a 5.6% revenue decline -- only confirm those negative conditions. In fact, JMP Securities analyst David Scharf downgraded Pra Group to Neutral as he believes that higher-than-ideal allowances and an unclear path to greater U.S. core purchasing will likely continue to weigh on the shares.

Now what: Management remains confident that industry consolidation in the U.S. core market will continue to serve as a long-term tailwind. "We feel confident that with our industry low leverage, we will be ready and able to purchase portfolios that are within our return profile both now and when volume inevitably picks up," said Chairman and CEO Steve Fredrickson. "In the meantime, we are highly profitable, producing strong results for shareholders, while we grow rapidly in Europe and South America, and improve our operating effectiveness consistently." More important, with Pra shares now off a whopping 65% from their 52-week highs, it might be an opportune time to buy into that bullishness.

The son of PRA Group's CEO is currently employed by The Motley Fool. Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of and recommends PRA Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

PRA Group Stock Quote
PRA Group
$34.14 (-0.35%) $0.12

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