Encore Capital Group Inc (NASDAQ: ECPG)

Sector: Financial Services Industry: Credit Services CIK: 0001084961
Market Cap 1.38 Bn
P/B 1.45
P/E -30.63
P/S 0.89
ROIC (Qtr) 4.89
Div Yield % 0.00
Rev 1y % (Qtr) 25.41
Total Debt (Qtr) 3.93 Bn
Debt/Equity (Qtr) 4.13

About

Price action

Investment thesis

Bull case

  • Operating cash flow of 159.93M provides strong 10.43x coverage of stock compensation 15.33M, indicating sustainable incentive practices.
  • Robust free cash flow of 132.04M exceeds capital expenditure of 27.89M by 4.73x, indicating strong organic growth funding capability.
  • Retained earnings of 1.08B represent substantial 1.14x of equity 952.91M, indicating strong internal capital generation.
  • Retained earnings of 1.08B provide strong 2.02x coverage of intangibles 535.63M, indicating quality earnings retention.
  • Operating cash flow of 159.93M provides strong 5.73x coverage of capital expenditure 27.89M, enabling organic growth.

Bear case

  • Operating cash flow of 159.93M barely covers its investment activities of (480.27M), with a coverage ratio of -0.33, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 159.93M barely covers operating expenses of 296.02M with a 0.54 ratio, suggesting thin operational efficiency margins and limited flexibility.
  • Retained earnings of 1.08B provide limited buffer against comprehensive income items of (131.29M), which is -8.26x, indicating elevated exposure to market risks.
  • Operating cash flow of 159.93M is outpaced by equity issuance of (35.33M) (-4.53 ratio), indicating concerning reliance on equity markets for funding operations.
  • Cash position of 172.49M provides only 0.60x coverage of interest expenses of 287.21M, indicating potential refinancing risks in a rising rate environment.

Consolidation Items Breakdown of Revenue (2024)

Peer comparison

Companies in the Credit Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 V Visa Inc. 897.70 Bn 213.43 91.32 25.17 Bn
2 MA Mastercard Inc 549.07 Bn 116.38 39.35 18.98 Bn
3 AXP American Express Co 389.64 Bn 72.71 12.55 59.23 Bn
4 COF Capital One Financial Corp 122.55 Bn 35.40 7.22 51.48 Bn
5 SYF Synchrony Financial 56.26 Bn 24.72 7.62 14.43 Bn
6 PYPL PayPal Holdings, Inc. 52.76 Bn 10.73 1.61 11.28 Bn
7 SOFI SoFi Technologies, Inc. 26.69 Bn 41.69 8.03 2.81 Bn
8 SLM SLM Corp 13.42 Bn 32.96 4.56 6.84 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.98 1.25
EV to Cash from Ops. EV/CFO 32.36 -2.39
EV to Debt EV to Debt 1.32 3.81
EV to EBIT EV/EBIT 16.40 -243.68
EV to EBITDA EV/EBITDA 14.79 -39.22
EV to Free Cash Flow [EV/FCF] EV/FCF 39.19 -0.50
EV to Market Cap EV to Market Cap 3.74 10.27
EV to Revenue EV/Rev 3.32 14.05
Price to Book Value [P/B] P/B 1.45 5.89
Price to Earnings [P/E] P/E -30.63 20.09
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 1.69
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.37
Dividend per Basic Share Div per Share (Qtr) 0.00 0.73
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 5.15
Interest Coverage Int. cover (Qtr) 1.10 -71.84
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 2.10 -86.41
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -30.27 8.73
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 5.83
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -632.62 -26.88
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 227.69 -2.66
EBIT Growth (1y) % EBIT 1y % (Qtr) 291.45 10.80
EBT Growth (1y) % EBT 1y % (Qtr) 117.96 -23.29
EPS Growth (1y) % EPS 1y % (Qtr) 77.52 -96.00
FCF Growth (1y) % FCF 1y % (Qtr) -6.30 143.12
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 17.56 7.95
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.30 0.24
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.05
Cash Ratio Cash Ratio 0.00 0.31
Current Ratio Current Ratio 0.00 0.89
Debt to Equity Ratio Debt/Equity (Qtr) 4.13 5.21
Interest Cover Ratio Int Coverage (Qtr) 1.10 -71.84
Times Interest Earned Times Interest Earned (Qtr) 1.10 -71.84
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 22.20 -19.12
EBIT Margin % EBIT Margin % (Qtr) 20.22 -6.81
EBT Margin % EBT Margin % (Qtr) 1.82 -29.98
Gross Margin % Gross Margin % (Qtr) 79.10 74.11
Net Profit Margin % Net Margin % (Qtr) -2.90 -44.00