Investment Thesis
ECPG demonstrates strong operational profitability (38.7% operating margin, 18.1% net margin) with solid free cash flow generation (77.5M, 16.3% margin), but is dangerously overleveraged with a 3.9x debt-to-equity ratio and critically weak interest coverage of 1.6x, leaving minimal margin for error. The 1,901% revenue surge appears driven by portfolio acquisitions typical of debt collection businesses, yet this growth masks deteriorating asset efficiency (1.6% ROA) and creates vulnerability to economic cycles or interest rate shocks.
Strengths
- Strong operating margin of 38.7% demonstrates pricing power and operational efficiency
- Positive free cash flow of 77.5M provides some financial flexibility despite leverage
- Profitable with 18.1% net margin and $86.2M net income, suggesting core business viability
Risks
- Extreme leverage: 3.9x debt-to-equity ratio with $4.0B long-term debt against $1.0B equity creates severe default risk
- Interest coverage ratio of 1.6x indicates minimal cushion to cover debt service—vulnerable to rising rates or revenue contraction
- Exceptionally low asset efficiency (1.6% ROA) and 1,901% revenue growth with only 284% earnings growth suggests accounting adjustments or one-time items masking earnings quality
Key Metrics to Watch
- Interest coverage ratio (must improve above 2.5x for stability)
- Operating cash flow sustainability and debt repayment capacity
- Debt-to-equity trajectory and refinancing risk as debt matures
Financial Metrics
Revenue
475.4M
Net Income
86.2M
EPS (Diluted)
$3.86
Free Cash Flow
77.5M
Total Assets
5.5B
Cash
227.2M
Profitability Ratios
Gross Margin
N/A
Operating Margin
38.7%
Net Margin
18.1%
ROE
8.3%
ROA
1.6%
FCF Margin
16.3%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
3.90x
Debt/Assets
81.0%
Interest Coverage
1.57x
Long-term Debt
4.0B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T10:03:23.086791 |
Data as of: 2026-03-31 |
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