PRA Group, Inc. PRAA benefits from rising portfolio income, improved cash collections, expanding U.S. portfolio supply, favorable pricing dynamics and a strong cash position.

PRAA’s Zacks Rank & Price Rally

PRA Group currently carries a Zacks Rank #3 (Hold).

The stock has gained 10.6% in the past three months compared with the industry’s 8.5% growth. The Zacks Finance sector and the S&P 500 composite has increased 4.4% and 5%, respectively, in the same time frame.

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PRA Group’s Robust Growth Prospects

The Zacks Consensus Estimate for 2025 earnings is pegged at $2.01 per share, indicating 17.5% growth from the 2024 estimate. The estimate for revenues is $1.2 billion, which indicates a rise of 6.3% from the 2024 estimate.

PRAA’s Impressive Earnings Surprise History

The bottom line of PRAA outpaced estimates in each of the trailing four quarters, the average surprise being 305.32%.

PRA Group’s Business Tailwinds

The company witnessed revenue growth in the first nine months of 2024, wherein the metric advanced 41.3% year over year, driven by increased portfolio income from higher purchase volumes. With the stabilization of the U.S. credit supply, portfolio availability and returns are expected to improve. This favorable environment positions the company to further expand its purchase volumes, which serve as its primary revenue driver. Strengthened recoveries, higher acquisition volumes and more favorable pricing dynamics are anticipated to contribute significantly to sustained growth.

PRA Group has diversified beyond debt collection into government collections and audit services. During the first nine months of 2024, the company acquired nonperforming loan portfolios valued at $975.2 million, reflecting an 11.4% increase from the prior-year comparable period. The expanding U.S. portfolio supply, combined with PRAA’s diversified operations across Europe, is anticipated to drive further improvements in performance.

Cash collections grew 12% year over year in the first nine months of 2024. Management projects the metric to witness 8-10% growth in 2025. Modernized collection processes are expected to push the cash efficiency ratio to more than 60% in 2025, further strengthening performance.

PRAA also has a solid cash balance, providing an impetus to pursue business investments. As of Sept. 30, 2024, its cash and cash equivalents improved 25.4% from the 2023-end level.

PRA Group’s Key Risks

The company grapples with escalating expenses, which rose 9.4% in the first nine months of 2024, due to elevated compensation and employee services, and agency fees. An increased expense level may continue to put pressure on the margins in the days ahead. 

A debt-laden balance sheet has pushed interest expenses up by 29% year over year in the first nine months of 2024. Its leverage ratio is deteriorating, with a total debt-to-total capital ratio of 72.8%, remaining much higher than the industry’s average of 52.6%.

Stocks to Consider

Some better-ranked stocks in the Finance space are Virtu Financial, Inc. VIRT, First Commonwealth Financial Corporation FCF and Jackson Financial Inc. JXN. While Virtu Financial currently sports a Zacks Rank #1 (Strong Buy), First Commonwealth Financial and Jackson Financial carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Virtu Financial’s earnings surpassed estimates in three of the trailing four quarters and missed the mark once, the average surprise being 8.03%. The Zacks Consensus Estimate for VIRT’s 2025 earnings indicates an improvement of 0.7% from the 2024 estimate. The consensus mark for revenues implies growth of 0.5% from the 2024 estimate. The consensus mark for VIRT’s 2025 earnings has moved 2.2% north in the past seven days.

The bottom line of First Commonwealth Financial beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 1.14%. The Zacks Consensus Estimate for FCF’s 2025 earnings indicates an improvement of 2.4% from the 2024 estimate. The consensus mark for revenues implies growth of 2.9% from the 2024 estimate. The consensus mark for FCF’s 2025 earnings has moved 2.1% north in the past 60 days.

Jackson Financial’s earnings outpaced estimates in two of the last four quarters and missed the mark twice, the average surprise being 2.20%. The Zacks Consensus Estimate for JXN’s 2025 earnings indicates an improvement of 9% from the 2024 estimate. The consensus mark for revenues implies growth of 3.6% from the 2024 estimate. The consensus mark for JXN’s 2025 earnings has moved 0.7% north in the past seven days.

Virtu Financial stock has gained 22.5% in the past three months. However, shares of First Commonwealth Financial and Jackson Financial have lost 2.5% and 4.1%, respectively, in the same time frame.

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