Portfolio Recovery Associates
Recent financial results show the small firm chugging along nicely even in the face of stiff competition from competitors such as Encore Capital Group
After last night's earnings report, investors sent the stock down about 7% today, possibly because of a slowing pace of accumulation of debt portfolios for collection. The fear is that without influxes of fresh debt, growth may slow down. That's a valid concern, but management's explanation -- that the prices just weren't right -- is equally important.
After all, there's a thin spread between the amount recovered and the amount laid out, about two cents on the dollar last quarter. You pay too much without upping your take, and suddenly profitability sinks. That's something PRAA wants to avoid at all costs, as it made clear in the conference call.
Still, the slowing pace of buying has endured more than a year, which is enough to give the Street a case of the nerves. Investors will want to keep a close eye on developments here, since the firm will need gruel, however thin, to keep moving forward.
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Seth Jayson has a wife who loves the idea of profiting from silly consumer behavior, which is why she owns shares of Portfolio Recovery Associates in her IRA. View his stock holdings and Fool profile here. Fool rules are here.