The specialty consumer finance company with a branch network throughout the Southeast and Southwestern U.S. has no visibility in credit performance, analysts said.
"Third quarter results significantly missed expectations due to ongoing credit issues, which is disappointing as we had observed signals of stabilization last quarter" analysts said, adding, "Given the sharp and unexpected rise in early-stage DQs, we do not believe Regional Management has its hands around credit issues and as a result there is low visibility in our forecasts."
Shares of Regional Management are down 27.74% to $13 in pre-market trading.
Separately, TheStreet Ratings team rates REGIONAL MANAGEMENT CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate REGIONAL MANAGEMENT CORP (RM) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 21.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Despite the current debt-to-equity ratio of 1.89, it is still below the industry average, suggesting that this level of debt is acceptable within the Consumer Finance industry.
- The gross profit margin for REGIONAL MANAGEMENT CORP is rather low; currently it is at 24.56%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 9.30% trails that of the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Consumer Finance industry. The net income has significantly decreased by 31.1% when compared to the same quarter one year ago, falling from $6.40 million to $4.41 million.
- You can view the full analysis from the report here: RM Ratings Report