PROG Holdings (PRG) has emerged as a prominent player in the burgeoning Point-of-Sale (POS) financing landscape. The company’s shares have soared over 28% in the past few days after announcing it exceeded revenue and earnings expectations for the second quarter. PROG’s future performance hinges on consumer spending, so economic uncertainties triggered by upcoming Federal rate decisions are expected to influence its stock’s performance. Yet, the shares trade at a relative discount to industry peers, making this an attractive option in the consumer financing segment.
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PROG’s Suite of Services
PROG Holdings is a fintech holding firm offering comprehensive financial products and transparent payment solutions to underserved demographic markets. The company targets consumers with lower income levels and poor credit ratings. PROG Holdings operates diverse subsidiaries, including Progressive Leasing, Vive Financial, Four Technologies, and Build.
Progressive Leasing, one of its primary segments, collaborates with traditional and e-commerce retailers to provide lease-purchase solutions for a variety of merchandise, including appliances, furniture, electronics, and automobile accessories. Another entity, Vive Financial, delivers revolving loans through private-label and Vive-branded credit cards. The firm’s Four Technologies delivers ‘Buy Now, Pay Later’ payment options through its proprietary platform.
PROG’s Recent Financial Results & Outlook
PROG Holdings recently released its financial results for the second quarter of 2024. Total revenue was $592.16 million, outperforming the analyst’s expectations of $571.24 million. However, consolidated revenues remained almost flat at $592.2 million compared to last year’s quarter.
Consolidated net earnings for the quarter were $33.8 million, a decrease from $37.2 million in the previous year. This decline in net revenues was primarily due to portfolio performance resuming to pre-pandemic levels, a smaller portfolio size, and $2.9 million worth of restructuring expenses related to cost-cutting actions.
Also, adjusted EBITDA decreased by 3.7% to $72.3 million, attributed to the same headwinds, though partially offset by a decrease in Selling, general, and administrative expenses (SG&A) owing to cost reduction efforts and controlled spending. The company’s earnings per share (EPS) of $0.92 exceeded the analysts’ estimates of $0.73.
The company concluded the quarter with $250.1 million in cash and a gross debt of $600 million. During the quarter, it bought back shares worth $36.7 million at an average price of $35.67 per share, leaving an available amount of $438.8 million from its $500 million share buyback program. Lastly, the company distributed a cash dividend of $0.12 per share.
Management has revised its 2024 full-year forecast and anticipates total revenues to be between $2.4 million and $2.45 million, an increase from the previous estimate of $2.285 million to $2.36 million. Net earnings are also expected to rise, with a new projection between $110,500 and $116,000, up from the previous $97,500 to $108,000 range. Adjusted EBITDA is now expected to be between $265,000 and $275,000, an increase from the prior $240,000 to $255,000 range. The company’s diluted EPS has also been revised upwards from $2.18 – $2.43 to $2.52 – $2.68.
What Is the Price Target for PRG Stock?
The stock has been on a roller coaster ride post-COVID, regaining its footing and posting a positive 43% return year-to-date. Shares trade at the high end of the 52-week price range of $26.39 – $44.54 and show positive price momentum by trading above the 20-day (36.45) and 50-day (35.32) moving averages. With a P/S ratio of 0.82x compared to the Rental & Leasing Services industry average of 1.58x, the stock appears relatively undervalued compared to industry peers.
Analysts following the company have been constructive on the stock. For instance, KeyBanc analyst Bradley Thomas, a five-star analyst according to Tipranks’ ratings, recently raised the price target on the shares from $44 to $46 while maintaining an Overweight rating. He noted that the Q2 results were encouraging and set the stage for a return to revenue growth in the second half of the year.
Based on four analysts’ recommendations and price targets, PROG Holding is rated a Strong Buy overall. The average price target for PRG stock is $47.67, representing a potential upside of 8.51% from current levels.
PRG in Final Analysis
PROG Holdings is well-positioned to capture the growth of the rapidly expanding Point-of-Sale financing market. The firm recently delivered robust second-quarter financial results, exceeding expectations and offering investors optimism for the remainder of the year. Following these results, PROG’s shares have surged over 28% and remain reasonably priced compared to industry peers. However, it’s key to remember that the Fed’s expected rate decision could impact its stock’s performance. Meanwhile, shares of PRG are a potentially appealing option for those looking to invest in the consumer financing segment.
