This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Profiting From Deadbeats: Under the Radar

Stocks in this article: PRAA V MA

"Under the Radar" uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

BOSTON ( TheStreet) -- The U.S. credit-card charge-off rate -- debt considered a loss -- at the likes of Visa (C), MasterCard (MA) and American Express (AXP) rose to 11.5% in August. Delinquencies are also on the rise, a sign debtors are still being pummeled by the economy. Is it possible to profit from this unfortunate situation?

Norfolk, Virginia-based Portfolio Recovery Associates (PRAA) is a specialty finance company that purchases and collects defaulted consumer receivables. Banks, credit-card companies and auto financers sell their "uncollectibles" to Portfolio Recovery for pennies on the dollar.

The company has a proprietary system to identify defaulters who are likely to pay up. They seize or force the sale of assets to collect a portion of the amount owed. A catastrophic recession throws a wrench in the gears, since the extent of debt defaults is extreme.

That can affect business in one of two ways: either economic pressures crimp the collection process or they allow Portfolio to scoop up profitable defaulters. The cost of receivables is falling, so the company can pick its price. But profit from such purchases may not materialize for years.

Anyway, the company's second-quarter net income rose 3% to $12 million, and earnings per share inched up 1% to 76 cents. Revenue grew 12% to $71 million. Volume squeezed margins. Its gross margin dropped from 36% to 33% and its operating margin fell from 33% to 30%.

Nevertheless, the stock looks attractive, especially considering recent pessimism. The shares were downgraded by Davenport on Aug. 6 due to strong price performance, insider selling and a weak near-term earnings outlook. Since the downgrade, the shares have fallen 2%.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs