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TLStockPicks (94.88)

Portfolio Recovery Associates... and something...

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February 12, 2009 – Comments (4) | RELATED TICKERS: PRAA

This is my favorite stock of all time and I just realized i have no clue what the second A is for.

Anyways, I wanted to get this entry in before the bell so I can be laughed at come 4:00.  PRAA, the debt collection agency that collect... debt... is announcing today, which of course invites crystal ball predictions of whether it will beat the street.  My crystal balls say yes, and I doubled my stock position to put my money where my mouth is.  And in the face of today's difficult debt-collection  joblessness and pennilessness, one probably wonders if thats the crystal balls talking or just some balls of steel.  

Well, yes, collections are tougher right now, but overhead is roughly the same as last quarter as they haven't been adding collectors (they beat by a nickel last quarter) yet they're collecting on a larger-than-ever pool of debt.  Hopefully, the large number of people they can call and harass will make up for the lower percentage success rates.  Meanwhile, EPS estimates for this quarter represent slightly negative earnings growth from 4Q07 to 4Q08; yet last quarter we saw EPS growth of about 5% yoy, and faced a similarly difficult environment.

PRAA is currently trading at 7x forward earnings and I wouldn't really care less if it misses by a dime this quarter; they have enough ammo to do some real damage in coming years.  Plus, I think missing earnings has already been priced in... at least somewhat. In the past month, PRAA has fallen over 30% while S&P has dropped only 6% and nasdaq has been almost breakeven.  So I don't see that much downside to shoring up my position prior to earnings.

So I'm not worried.  Nope.  Not one bit.  Crap it's 3:52 now. OH DEAR GOD PLEASE PRAA ANNOUNCE SOMETHING GOOD!!!!

4 Comments – Post Your Own

#1) On February 12, 2009 at 4:20 PM, Imperial1964 (98.28) wrote:

I had 20% of my portfolio in PRAA a year and a half ago, after doubling down after they lost their momentum status.  I've wanted to pick up more on the big dips, but I won't let one stock account for more than 20% of my total cost basis. Since then I have been adding to other positions to get things back in balance.

Currently I am down 62% on PRAA.

I don't know what the estimates were, but the earnings were unspectacular.  I believe PRAA will remain unspectacular with zero growth until this recession is over.

I think PRAA is a strong buy and hold, but only if you want to hold for about half a business cycle.  When the economy turns around they will still experience some growing pains as they do not have nearly enough staff to collect on all the debt they own in a favorable economic environment.  When they hire new collectors their average productivity will decline.

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#2) On February 12, 2009 at 4:39 PM, TLStockPicks (94.88) wrote:

Imperial, they met estimates which i think really means they beat expectations.  I'm hoping for a short-cover rally tomorrow so i can make a quick buck and take out some of my position.  Maybe some of the analyst folks will upgrade given the unexpected strength of PRAA's fee-based business.

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#3) On February 12, 2009 at 5:09 PM, hondo928 (99.62) wrote:

I own this stock, and made a buy propsal in my investment club that went through, and I don't think they'll beat.  I skipped the comments and haven't looked yet, but my reasoning is this...they have continuously missed for like 9 straight quarters, which is my biggest qualm with company, and two collections are tight, and they aren't at full efficency in call centers yet.  My guess is in 6-18 months they start putting out some stellar performance

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#4) On February 12, 2009 at 5:15 PM, hondo928 (99.62) wrote:

Ok so now that I checked it two seconds later, they met Rev and EPS which is incredibly good, I suspect they sold off some today based on people expecting they were going to miss numbers, also they were inline with "whisper numbers" I sure hope they get a bit of a short squeeze it's deserved as the sell off isn't.  Not to mention it crossed below its lower bollinger band last week,  I see some very good potential out of this, if they had beat I think we could have seen 35 a share within a couple weeks

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