Portfolio Recovery Associates, Inc. (PRAA)

Killim1 (96.63) Submitted: 11/05/07 5:07 PM : Start Price: $41.50 PRAA Score: 15.30

How many people do you know are credit card or automobile debt free? How many do you think will not be able to pay their debt by the end of 2008 or 2009? I am positive the credit card debt has some linkage to the recent “sub-prime meltdown syndrome”.


Don’t look now, but PRAA is on sale. 3Q 07 report was a little below the mark and the end results is PRAA is attempting to reach its 52 week low. In my view, the shorts have it wrong….for the long view. This company has an ROE of 20%, ROIC 19.45%, $387m in total assets vs $164m in total liabilities and just completed a 1m share buy back. If you compare its PE to the industry and S&P 500, you will find a PE of 14.38 vs 20.24 and 21.55. A couple more comparisons are operating margin of 38% vs 15.2% and 19.2%, profit margin of 23.6% vs 8.4% and 13.5%, and projected growth rate of 28%+ for 2008. Do I need to mention the PEG is .99? http://www.cnbc.com/id/15837265?q=praa I generally use www.smartmoney.com price calculator for a quick down and dirty evaluation. It calculates the current price of $41.85 and estimated value price of $56.54. PRAA spent money this year on expanding its office space in VA as well as establishing a new office in KS (completion date sometime in 4Q 2007). It’s hard to bet against a company who is spending its hard earned resources to expand and improve work efficiency.


Because of time, I am selecting PRAA for my portfolio today. However, if I were placing my own funds on this stock, I would wait a week or two until all of the bad news is out and factored into the stock price.

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