World Acceptance Corp (NASDAQ: WRLD)

Sector: Financial Services Industry: Credit Services CIK: 0000108385
Market Cap 771.22 Mn
P/B 2.11
P/E 13.52
P/S 1.35
ROIC (Qtr) 13.59
Div Yield % 0.00
Rev 1y % (Qtr) 2.33
Total Debt (Qtr) 660.08 Mn
Debt/Equity (Qtr) 1.81

About

World Acceptance Corporation (WRLD) is a prominent player in the United States' small-loan consumer finance services industry. Established in 1962, the company has grown to become one of the largest in its sector, with a significant presence in the southeastern and midwestern regions of the country. It operates 1,048 branches across 16 states, offering a variety of financial products and services. WRLD's primary source of revenue comes from the origination of new loans, with interest and fee income accounting for a significant portion of its total...

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Price action

Investment thesis

Bull case

  • Operating cash flow of 258.84M provides strong 30.50x coverage of stock compensation 8.49M, indicating sustainable incentive practices.
  • Robust free cash flow of 256.21M exceeds capital expenditure of 2.63M by 97.27x, indicating strong organic growth funding capability.
  • Strong free cash flow of 256.21M provides 0.93x coverage of SG&A expenses 275.49M, indicating efficient cost management.
  • Retained earnings of 92.14M provide strong 7.02x coverage of intangibles 13.13M, indicating quality earnings retention.
  • Free cash flow of 256.21M provides solid 1.44x coverage of operating expenses 177.48M, showing operational efficiency.

Bear case

  • Operating cash flow of 258.84M barely covers its investment activities of (208.12M), with a coverage ratio of -1.24, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Cash reserves of 14.88M provide limited coverage of acquisition spending of (18.89M), which is -0.79x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating cash flow of 258.84M is outpaced by equity issuance of (109.20M) (-2.37 ratio), indicating concerning reliance on equity markets for funding operations.
  • R&D investment of 0 represents just 0x of SG&A expenses of 275.49M, indicating potential underinvestment in innovation relative to administrative overhead.
  • Cash position of 14.88M provides only 0.32x coverage of interest expenses of 46.46M, indicating potential refinancing risks in a rising rate environment.

Peer comparison

Companies in the Credit Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 V Visa Inc. 685.45 Bn 34.17 17.14 25.17 Bn
2 MA Mastercard Inc 520.38 Bn 36.52 16.53 18.98 Bn
3 AXP American Express Co 266.36 Bn 25.27 4.08 59.23 Bn
4 COF Capital One Financial Corp 111.93 Bn 102.41 3.87 51.48 Bn
5 PYPL PayPal Holdings, Inc. 58.35 Bn 11.87 1.78 11.28 Bn
6 SYF Synchrony Financial 32.00 Bn 9.16 3.32 14.43 Bn
7 SOFI SoFi Technologies, Inc. 29.56 Bn 46.17 8.90 2.81 Bn
8 ALLY Ally Financial Inc. 14.44 Bn 52.52 1.83 20.63 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.23 1.03
EV to Cash from Ops. EV/CFO 5.07 4.72
EV to Debt EV to Debt 1.99 2.99
EV to EBIT EV/EBIT 11.13 -246.63
EV to EBITDA EV/EBITDA 10.30 -62.30
EV to Free Cash Flow [EV/FCF] EV/FCF 5.12 7.33
EV to Market Cap EV to Market Cap 1.70 10.21
EV to Revenue EV/Rev 2.30 10.01
Price to Book Value [P/B] P/B 2.11 3.47
Price to Earnings [P/E] P/E 13.52 13.86
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 1.59
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.22
Dividend per Basic Share Div per Share (Qtr) 0.00 0.68
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 4.82
Interest Coverage Int. cover (Qtr) 2.54 -64.96
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 40.82 -85.80
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 52.70 7.91
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 5.47
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -20.18 16.85
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -21.08 -0.69
EBIT Growth (1y) % EBIT 1y % (Qtr) -21.78 33.67
EBT Growth (1y) % EBT 1y % (Qtr) -33.27 1.73
EPS Growth (1y) % EPS 1y % (Qtr) -29.08 -64.54
FCF Growth (1y) % FCF 1y % (Qtr) 6.57 129.37
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 2.31 18.73
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.54 0.23
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.05
Cash Ratio Cash Ratio 0.00 0.46
Current Ratio Current Ratio 0.00 1.05
Debt to Equity Ratio Debt/Equity (Qtr) 1.81 4.88
Interest Cover Ratio Int Coverage (Qtr) 2.54 -64.96
Times Interest Earned Times Interest Earned (Qtr) 2.54 -64.96
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 22.30 -17.83
EBIT Margin % EBIT Margin % (Qtr) 20.64 125.65
EBT Margin % EBT Margin % (Qtr) 12.51 -9.92
Gross Margin % Gross Margin % (Qtr) 100.00 72.34
Net Profit Margin % Net Margin % (Qtr) 10.00 -23.76