Why World Acceptance (WRLD) Stock Is Tanking Today

NEW YORK (TheStreet) -- World Acceptance Corp. (WRLD) stock is plunging -8.85% to $70.14 after KPMG L.L.P. informed the Greenville-based consumer finance company that it would not respond to its request for a proposal to serve as the company's accounting firm.

In KPMG's Aug. 29 filing letter to the SEC, the firm said its previous audit reports of World Acceptance's financial statements for the years ended March 31, 2013 and 2014 did not contain any disagreement of opinions or changes due to uncertainty in accounting principles or audit scope.

World Acceptance said it's in the final stages of selecting a new firm, but is currently being investigated by U.S. regulators to determine if consumer protection laws had been broken.

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The company is also facing shareholder allegations that it violated federal securities laws, but World Acceptance said these allegations have no merit and "intends to vigorously defend itself."

About 1.02 million shares of World Acceptance were traded by 1:06 p.m., compared to an average trading volume of about 130,700 shares a day.

Separately, TheStreet Ratings team rates WORLD ACCEPTANCE CORP/DE as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate WORLD ACCEPTANCE CORP/DE (WRLD) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, impressive record of earnings per share growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WRLD's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • WORLD ACCEPTANCE CORP/DE has improved earnings per share by 17.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WORLD ACCEPTANCE CORP/DE increased its bottom line by earning $9.17 versus $7.94 in the prior year. This year, the market expects an improvement in earnings ($10.68 versus $9.17).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Consumer Finance industry and the overall market, WORLD ACCEPTANCE CORP/DE's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $66.79 million or 20.44% when compared to the same quarter last year. In addition, WORLD ACCEPTANCE CORP/DE has also vastly surpassed the industry average cash flow growth rate of -38.59%.
  • Despite the current debt-to-equity ratio of 1.93, it is still below the industry average, suggesting that this level of debt is acceptable within the Consumer Finance industry.
  • You can view the full analysis from the report here: WRLD Ratings Report

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