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1. Company Snapshot

1.a. Company Description

PRA Group, Inc., a financial and business services company, engages in the purchase, collection, and management of portfolios of nonperforming loans in the Americas, Australia, and Europe.It is involved in the purchase of accounts that are primarily the unpaid obligations of individuals owed to credit originators, which include banks and other types of consumer, retail, and auto finance companies.The company also acquires nonperforming loans, including Visa and MasterCard credit cards, private label and other credit cards, installment loans, lines of credit, deficiency balances of various types, legal judgments, and trade payables from banks, credit unions, consumer finance companies, retailers, utilities, automobile finance companies, and other credit originators.


In addition, it provides fee-based services on class action claims recoveries and by servicing consumer bankruptcy accounts.The company was formerly known as Portfolio Recovery Associates, Inc.and changed its name to PRA Group, Inc.


in October 2014.PRA Group, Inc.was incorporated in 1996 and is headquartered in Norfolk, Virginia.

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1.b. Last Insights on PRAA

The recent 3-month performance of PRA Group, Inc. was negatively impacted by the investigation into the sale of ProAssurance Corporation, which may have raised concerns among investors. Additionally, the company's announcement of its first quarter 2025 results on May 5, 2025, may have created uncertainty and volatility in the market. Furthermore, the absence of recent earnings release may have contributed to the negative sentiment.

1.c. Company Highlights

2. PRAA's Q3 Earnings: A Mixed Bag

PRAA's Q3 financial performance was marked by a 12% year-over-year increase in portfolio revenue to $310 million, with portfolio income growing 20% to $259 million. Adjusted net income was $21 million, and adjusted ROACE was 9%. The company's EPS came in at $0.53, beating estimates of $0.5. Cash collections grew 14% year-over-year to $542 million, driven by higher levels of recent portfolio purchases and investments in the U.S. legal collections channel.

Publication Date: Nov -18

📋 Highlights

Operational Highlights

The company's operational initiatives are on track, with a focus on cost efficiency, reorganizing U.S. operations, and modernizing the IT platform. As Martin Sjolund, President and CEO, highlighted, "We are building a foundation for long-term success." The company's ERC stood at $8.4 billion, up 15% year-over-year, indicating a strong pipeline for future cash collections.

Valuation and Leverage

With a P/E Ratio of 6.89 and an EV/EBITDA of 2.65, PRAA's valuation appears reasonable. The company's net leverage, defined as net debt to adjusted EBITDA, was 2.8x as of September 30, compared to 2.9x in the prior year period. Rakesh Sehgal, Executive Vice President and CFO, noted that the company has ample capacity and financial flexibility under its current debt structure, with $3.2 billion in total committed capital under its credit facilities and $1.2 billion in total availability.

Outlook and Guidance

PRAA is reaffirming its key financial targets for 2025, including a purchase target of $1.2 billion, cash collections growth target of high single digits, and cash efficiency target of 60% plus for the full year. Analysts estimate next year's revenue growth at 8.2%, indicating a stable outlook for the company. With its diversified portfolio and disciplined investment approach, PRAA is poised to continue its growth trajectory.

Investment Implications

The company's ROE of 7.47% and ROIC of 39.64% indicate a strong return on investment. With a P/B Ratio of 0.47, PRAA's valuation appears attractive. As the company continues to execute on its operational initiatives and maintain its financial discipline, it is well-positioned for long-term success.

3. NewsRoom

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PRA Group Looks Like a Smart Buy Right Now With Tailwinds Building Up

Dec -04

Source: zacks.com

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5 Undervalued Stocks With Low Price-to-Sales Ratios & Strong Momentum

Dec -03

Source: zacks.com

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Ensign Peak Advisors Inc Has $235,000 Stock Holdings in PRA Group, Inc. $PRAA

Dec -02

Source: defenseworld.net

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Commonwealth of Pennsylvania Public School Empls Retrmt SYS Takes Position in PRA Group, Inc. $PRAA

Nov -29

Source: defenseworld.net

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Wall Street Analysts Think PRA Group (PRAA) Could Surge 41.95%: Read This Before Placing a Bet

Nov -26

Source: zacks.com

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5 Value Stocks With Compelling Price-to-Sales Ratios & Growth Ahead

Nov -19

Source: zacks.com

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Bitcoin Depot (NASDAQ:BTM) vs. PRA Group (NASDAQ:PRAA) Head to Head Comparison

Nov -19

Source: defenseworld.net

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PRA Group to Participate in Upcoming Investor Events

Nov -17

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.08%)

6. Segments

Portfolios of Nonperforming Loans

Expected Growth: 8%

PRA Group's 8% growth in portfolios of nonperforming loans is driven by increasing demand for debt recovery services, expansion into new markets, and strategic acquisitions. Additionally, the company's expertise in purchasing and managing nonperforming loans, as well as its ability to leverage technology to optimize collections, contribute to its growth.

Other

Expected Growth: 12%

PRA Group's 12% growth in 'Other' segment is driven by increasing demand for its business process outsourcing services, expansion into new markets, and strategic acquisitions. Additionally, the company's focus on digital transformation and investment in technology have improved operational efficiency, leading to higher revenue and profitability.

7. Detailed Products

Contingency Fee Based Debt Buying

PRA Group, Inc. purchases and manages portfolios of defaulted consumer debts, including credit cards, auto loans, and other types of debt.

Fee-Based Services

PRA Group, Inc. offers fee-based services, including debt collection, skip tracing, and litigation services, to creditors and debt buyers.

Government Services

PRA Group, Inc. provides debt collection and revenue enhancement services to government agencies, including tax authorities and municipalities.

Purchase, Rehabilitation and Servicing (PRS) Program

PRA Group, Inc.'s PRS program purchases and rehabilitates distressed debt portfolios, with a focus on customer service and debt resolution.

8. PRA Group, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for PRA Group, Inc. is medium due to the presence of alternative debt collection agencies and financial institutions that offer similar services.

Bargaining Power Of Customers

The bargaining power of customers for PRA Group, Inc. is low due to the company's diversified client base and the lack of concentration of customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers for PRA Group, Inc. is low due to the company's ability to negotiate with suppliers and the lack of concentration of suppliers.

Threat Of New Entrants

The threat of new entrants for PRA Group, Inc. is high due to the relatively low barriers to entry in the debt collection industry and the increasing trend of fintech companies entering the market.

Intensity Of Rivalry

The intensity of rivalry for PRA Group, Inc. is high due to the competitive nature of the debt collection industry and the presence of several established players in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 72.26%
Debt Cost 8.85%
Equity Weight 27.74%
Equity Cost 11.26%
WACC 9.51%
Leverage 260.46%

11. Quality Control: PRA Group, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Oportun Financial

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Value: 9.4

Growth: 3.3

Quality: 6.0

Yield: 0.0

Momentum: 10.0

Volatility: 2.0

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Green Dot

A-Score: 4.5/10

Value: 9.1

Growth: 2.9

Quality: 4.9

Yield: 0.0

Momentum: 7.5

Volatility: 2.3

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A-Score: 4.4/10

Value: 6.6

Growth: 3.9

Quality: 6.6

Yield: 0.0

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Volatility: 3.0

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Mill City Ventures III

A-Score: 4.2/10

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Growth: 5.4

Quality: 8.2

Yield: 0.0

Momentum: 10.0

Volatility: 0.0

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PRA Group

A-Score: 4.2/10

Value: 9.3

Growth: 2.6

Quality: 7.9

Yield: 0.0

Momentum: 1.5

Volatility: 3.7

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Consumer Portfolio Services

A-Score: 3.8/10

Value: 7.3

Growth: 5.0

Quality: 4.8

Yield: 0.0

Momentum: 2.0

Volatility: 3.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

17.08$

Current Price

17.08$

Potential

-0.00%

Expected Cash-Flows