With EPS Growth And More, PRA Group (NASDAQ:PRAA) is interesting
Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no revenue, let alone profit. But as Peter Lynch said in One Up on Wall Street“Long shots almost never pay off.”
So if you’re like me, you might be more interested in profitable and growing companies, like PRA Group (NASDAQ: PRAA). Now, I’m not saying the stock is necessarily undervalued today; but I can’t help but appreciate the profitability of the business itself. While a well-funded business may suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to turn a profit, or else breathe its last breath.
See our latest analysis for PRA Group
How fast is PRA Group increasing its earnings per share?
The market is a short-term voting machine, but a long-term weighing machine, so stock price eventually follows earnings per share (EPS). This means EPS growth is seen as a real benefit by most successful long-term investors. Who among us wouldn’t applaud PRA Group’s stratospheric annual EPS growth of 46%, compounded, over the past three years? Although this type of growth rate is not sustainable for long, it certainly catches my eye. like a crow with a sparkling stone.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. I note that the income of PRA Group operations was lower than its turnover over the last twelve months, which could distort my analysis of its margins. While we note that PRA Group’s EBIT margins have remained stable over the past year, revenues increased by 2.8% to $1.1 billion. It is progress.
You can check the company’s revenue and profit growth trend in the table below. Click on the table to see the exact numbers.
Luckily, we have access to analyst forecasts from PRA Group future profits. You can make your own predictions without looking, or you can take a peek at what the pros are predicting.
Are PRA Group insiders aligned with all shareholders?
I feel safer owning stock in a company if insiders also own stock, thereby aligning our interests more closely. It is therefore good to see that the insiders of the PRA group have a significant capital invested in the stock. Indeed, they hold for 35 million dollars of its shares. It shows strong buy-in and can indicate belief in the business strategy. Although it represents only 2.0% of the company, the value of this investment is enough to show that insiders have a lot to do with the company.
Should you add PRA Group to your watchlist?
PRA Group’s earnings per share took off like a rocket aimed straight at the moon. This type of growth is simply eye-catching, and the significant investment held by insiders certainly informs my view of the business. The hope is, of course, that the strong growth marks a fundamental improvement in the business economy. So yes, on this short analysis, I think it’s worth considering PRA Group for a spot on your watch list. Again, the ubiquitous specter of investment risk must be taken into account. We have identified 2 warning signs with PRA Group, and understanding them should be part of your investment process.
You can invest in the company of your choice. But if you’d rather focus on stocks that have been insider buying, here’s a list of companies that have been insider buying over the past three months.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.