There are no lack of customers for CPSS given the current state of economy. Consumer credit ratings have been dropping steadily over the past few years as increasing bankruptcies and foreclosures become a reality for consumers. This has caused many previously desirable borrowers to turn into subprime borrowers who require companies like CPSS to facilitate their next automobile purchase.
The company has been steadily increasing their access to credit facilities, which allow them to make the loans they need to grow revenues. Their most recent credit facility for $100 million was secured in March, allowing the company to make loans on that money with a fairly substantial spread between the cost of borrowing and the cost at which they lend to subprime borrowers.
A key strategic partner that had previously sold all of his shares prior to the financial crisis recently initiated a position in CPSS after being out for a number of years. Arthur Levine of Levine Leichtman Capital Partners bought roughly $1 million dollars worth of the stock in December of 2010. Mr. Levine can be viewed as an activist partner in CPSS due to his previous involvement in the company, serving on the board of directors and providing capital to the company through notes.
CPSS is still being priced as if we are in the midst of a banking crisis. Price-to-free-cash-flow here is less than 1 times the current price.