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Encore Capital Group (ECPG)
:ECPG
Top Page
Encore Capital
(NASDAQ:ECPG)
51Neutral
Positive Factors
Collections and Purchases
Encore Capital Group closed out 2024 with record collections and purchases in the fourth quarter, collections upside relative to its forecast, and a continuation of tailwinds in the U.S. market that have driven strong results all year and position the business as a cyclical winner.
Negative Factors
Goodwill Impairment
Encore Capital Group reported a significant non-cash goodwill impairment at its European Cabot business in addition to writing down expected future recoveries on the Cabot portfolio.
One-time Expenses
The company recorded a variety of one-time expenses in the fourth quarter that, in aggregate, had a ($262M) impact on results.
Encore Capital (ECPG) vs. S&P 500 (SPY)
Market Cap
$794.84M
Dividend YieldN/A
Average Volume (3M)366.27K
Price to Earnings (P/E)―
Beta (1Y)1.35
Revenue Growth6.78%
EPS Growth33.06%
CountryUS
Employees7,400
SectorFinancial
Sector Strength77
IndustryBanking
Share Statistics
EPS (TTM)-5.88
Shares Outstanding23,691,292
10 Day Avg. Volume778,051
30 Day Avg. Volume366,272
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.61
Price to Cash Flow (P/CF)8.60
P/FCF Ratio1.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$59.33Price Target Upside76.84% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering3
Encore Capital Business Overview & Revenue Model
Company DescriptionEncore Capital Group, Inc. (NASDAQ: ECPG) is a leading global specialty finance company providing debt recovery solutions for consumers and property owners across a diverse range of financial assets. Headquartered in San Diego, California, Encore Capital operates in several countries and focuses on purchasing portfolios of defaulted consumer receivables from major banks, credit unions, utility companies, auto finance companies, and retail credit providers. The company employs a data-driven approach to debt collection, utilizing advanced analytics and a consumer-centric approach to maximize recovery efforts while maintaining a commitment to fair and ethical practices.
How the Company Makes MoneyEncore Capital Group generates revenue primarily by purchasing defaulted consumer debt portfolios at a significant discount to their face value and subsequently collecting payments on those debts. The company's revenue model hinges on its ability to recover more from these debt portfolios than the purchase price, effectively creating a margin between the acquisition cost and the collected amount. Encore Capital leverages proprietary analytics and technology to assess the value of debt portfolios and optimize collection strategies. The company also benefits from economies of scale and operational efficiencies, which enhance its profitability. Additionally, Encore Capital has strategic partnerships with financial institutions and other lenders, enabling consistent access to a supply of charged-off debt, which is crucial for sustaining its business operations.
Encore Capital Financial Statement Overview
Summary
Encore Capital faces challenges in maintaining profitability, evident from negative net income and declining margins. The balance sheet strength improved with debt reduction, though the negative ROE is a concern. Cash flow stability offers some reassurance, but overall financial health requires addressing revenue growth and profitability constraints.Income Statement
The company has shown fluctuating revenue with a decline in recent years from 2020 to 2023, although a slight recovery is noted in 2024. Gross profit margin has decreased, indicating cost pressures. Net income has been negative for the past two years, signaling challenges in profitability. The EBIT margin is low, and the EBITDA margin turned negative in 2024, raising concerns about operational efficiency.45
Neutral
Balance Sheet
The balance sheet shows a moderate equity position with a debt-to-equity ratio improving due to the reduction of total debt to zero by 2024. However, the return on equity is negative in the last two years, highlighting profitability issues. The equity ratio has been stable, suggesting a balanced asset structure.60
Neutral
Cash Flow
Operating cash flow has been stable, but free cash flow growth is inconsistent. The operating cash flow to net income ratio is high due to negative net income, indicating issues with profit conversion. The free cash flow to net income ratio shows better performance, driven by effective capital expenditure management.55
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.32B | 1.22B | 1.40B | 1.61B | 1.50B | Gross Profit |
| 893.45M | 571.24M | 769.70M | 927.98M | 834.40M | EBIT |
| 157.33M | 16.54M | 462.17M | 633.27M | 533.56M | EBITDA |
| 188.76M | 63.35M | 510.72M | 683.35M | 579.29M | Net Income Common Stockholders |
| -139.24M | -206.49M | 194.56M | 350.78M | 211.85M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 199.87M | 158.36M | 143.91M | 189.65M | 189.18M | Total Assets |
| 4.79B | 4.63B | 4.51B | 4.61B | 4.86B | Total Debt |
| 3.67B | 3.32B | 3.98B | 3.00B | 3.28B | Net Debt |
| 3.47B | 3.16B | 3.84B | 2.81B | 3.09B | Total Liabilities |
| 4.02B | 3.69B | 3.33B | 3.42B | 3.64B | Stockholders Equity |
| 767.33M | 936.54M | 1.18B | 1.19B | 1.22B |
| Cash Flow | Free Cash Flow | |||
| 127.16M | 101.28M | 173.46M | 269.68M | 278.26M | Operating Cash Flow |
| 156.17M | 152.99M | 210.68M | 303.05M | 312.86M | Investing Cash Flow |
| -440.43M | -401.94M | -130.24M | 339.90M | 82.83M | Financing Cash Flow |
| 317.77M | 268.30M | -107.44M | -655.69M | -403.20M |
Encore Capital Technical Analysis
Negative
33.55
Price Trends
46.53
Negative
47.23
Negative
46.56
Negative
Market Momentum
-4.12
Positive
20.11
Positive
8.36
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ECPG, the sentiment is Negative. The current price of 33.55 is below the 20-day moving average (MA) of 43.50, below the 50-day MA of 46.53, and below the 200-day MA of 46.56, indicating a bearish trend. The MACD of -4.12 indicates Positive momentum. The RSI at 20.11 is Positive, neither overbought nor oversold. The STOCH value of 8.36 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ECPG.
Encore Capital Risk Analysis
Encore Capital disclosed 38 risk factors in its most recent earnings report. Encore Capital reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Encore Capital Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Neutral | $5.67B | 23.74 | 14.15% | ― | 13.70% | -9.00% | |
68 Neutral | $690.18M | 8.50 | 19.28% | ― | -2.78% | 24.39% | |
64 Neutral | $5.56B | 11.56 | 15.96% | 8.93% | 7.96% | -20.11% | |
64 Neutral | $13.80B | 10.64 | 9.23% | 4.22% | 17.66% | -7.66% | |
60 Neutral | $10.27B | 18.62 | 6.63% | 3.58% | 3.41% | -12.41% | |
57 Neutral | $744.76M | 10.56 | 6.13% | ― | 39.47% | ― | |
51 Neutral | $794.84M | ― | -16.34% | ― | 6.78% | 33.06% |
* Financial Sector Average
Performance Comparison
ECPG
Encore Capital
33.55
-14.58
-30.29%
CACC
Credit Acceptance
471.47
-83.83
-15.10%
PRAA
Pra Group
18.98
-4.78
-20.12%
WRLD
World Acceptance
120.10
-10.87
-8.30%
ALLY
Ally Financial
33.45
-3.77
-10.13%
OMF
OneMain Holdings
45.95
0.97
2.16%
Encore Capital Earnings Call Summary
Earnings Call Date: Feb 26, 2025 | % Change Since: -32.71% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a mixed sentiment. While Encore achieved record portfolio purchases and significant growth in collections and cash generation, it faced challenges with Cabot's restructuring and impairments due to issues in the UK and European markets. The strong performance in the U.S. and improved leverage ratio indicate positive momentum, but the substantial write-downs and restructuring in Europe present significant hurdles.Highlights
Record Portfolio Purchases
Encore's global portfolio purchases reached a record $1.35 billion in 2024, an increase of 26% compared to 2023, driven by a strong U.S. market.
Strong Collections and Cash Generation Growth
Collections grew by 16% to $2.16 billion, and cash generation increased by 20% in 2024 compared to the previous year.
U.S. Market Performance
MCM in the U.S. had a record year with portfolio purchases reaching $1 billion, up 23% from 2023. Collections in 2024 increased by 20%, with MCM's U.S. ERC exceeding $5 billion for the first time.
Leverage Ratio Improvement
Leverage ratio declined from 2.9x at the end of 2023 to 2.6x at the end of 2024, nearing the midpoint of the target leverage range.
Improved Balance Sheet and Funding Flexibility
Encore effectively managed debt maturities, redeemed euro and sterling notes, and increased its revolving credit facility capacity.
Lowlights
Cabot's Restructuring and Challenges
Cabot faced significant restructuring due to persistent issues, exiting two underperforming markets, which led to an ERC reduction of $453 million and a $101 million goodwill impairment.
European Market Challenges
The UK and European markets faced subdued lending growth and low charge-offs, impacting portfolio supply and competition levels.
Restructuring and Impairment Charges
Encore incurred $6 million in restructuring charges, a $19 million IT-related asset impairment, and further goodwill impairment due to revised collection forecasts.
Company Guidance
During the Encore Capital Group's fourth quarter 2024 earnings call, CEO Ashish Masih provided guidance for 2025, highlighting several key metrics. The company anticipates global portfolio purchases to exceed the record $1.35 billion achieved in 2024, driven by a strong supply environment in the U.S. where 74% of capital was deployed. They expect global collections to grow by 11% to reach $2.4 billion, building on the 16% increase in 2024 which totaled $2.16 billion. Cash generation is projected to continue its upward trend following a 20% growth in 2024. Additionally, Encore plans to resume share repurchases in 2025 as their leverage ratio decreased from 2.9x in 2023 to 2.6x in 2024, nearing the midpoint of their target range. The company also projects an increase in interest expense to approximately $285 million and an effective tax rate in the mid-20s percentage range.Encore Capital Corporate Events
Stock BuybackBusiness Operations and StrategyFinancial Disclosures
Encore Capital Reports Strong Q4 2024 Growth
Positive
Feb 26, 2025
On February 26, 2025, Encore Capital Group, Inc. released its fourth-quarter 2024 investor presentation, highlighting significant growth driven by its U.S. business. The company reported a 26% increase in portfolio purchases, a 16% rise in collections, and a 20% boost in cash generation for 2024. Despite challenges with its European subsidiary, Cabot, Encore implemented restructuring actions and achieved an 8% increase in collections. The company plans to resume share repurchases in 2025, indicating a positive outlook for future performance.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.