Here's Why PRA Group Lost 16.7% in March
What happened
Shares of PRA Group (NASDAQ: PRAA) plunged 16.7% in March, according to data from S&P Global Market Intelligence, after the debt-collection specialist released fourth-quarter results that showed a continuation of the company's aggressive, and expensive, plan for growth.
So what
After the markets closed on Feb. 28, PRA released mixed quarterly results, with revenue at $236.7 million up 12% year over year and earnings per share of $0.33, $0.07 per share ahead of consensus estimates. But the company's expenses climbed as it looked to grow its portfolio, with PRA in the quarter spending $490 million on finance receivables.
Soon after earnings, PRA re-emphasized that it was in growth mode by announcing the acquisition of Resurgent Holdings' Canadian business for an undisclosed sum.
The company also potentially spooked markets by disclosing that it belatedly realized it should have used different rules to account for certain contracts in Austria and as a result understated its total revenue by $5.5 million between 2016 and 2018. PRA said it doesn't anticipate any material changes but did briefly delay filing its 10-K year-end document.
Now what
PRA shareholders have had a turbulent ride over the past year-plus. Shares had been up 30% year to date before March 1, and even after the declines in the month they're still up 12% for the year. But that's following a 26% drop in 2018.
The business is growing, but investors are grappling over whether that growth will ever translate into sustainable profitability growth.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PRA Group. The Motley Fool has a disclosure policy.