Seeking Alpha: Old Faithful Portfolio Recovery Associates Does It Again

The kind of performance Portfolio Recovery Associates (PRAA) delivers just doesn't get boring. Although debt recovery is not a well-liked business by any stretch, PRA has done a remarkable job of refining its model so as to identify only those who can pay their debts, and the extent to which those customers are likely to respond to particular collection methodologies. Moreover, PRA has done a very good job of adhering to above-average standards such that it is one of the preferred buyers in the market and a likely beneficiary of rule/regulatory changes that could push some competitors out of the market.

Still, it's not as though the shares are notably cheap. The valuation model I use is very sensitive to changes in inputs like collection rates and discount rates, but almost all of the results end up falling into a valuation range of about $150 to $175. Further consolidation in the debt collection space and/or continued outperformance on collections and collection efficiency could certainly make those estimates conservative, but it's hard to see enough margin of safety here for me to recommend new investors make big purchases at these prices.

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Old Faithful Portfolio Recovery Associates Does It Again