Investment Thesis
PRA Group exhibits severe financial distress despite explosive 577% revenue growth, with interest coverage of only 0.5x indicating inability to service debt from operations. The catastrophic 427% decline in net income amid rising revenues, combined with extremely weak returns (ROE 2.8%, ROA 0.5%), suggests the revenue growth is not profitable and likely driven by acquisitions rather than operational improvements.
Strengths
- Positive operating income of $103.3M with healthy 32.8% operating margin
- Positive free cash flow of $23.5M demonstrates some cash generation capability
- Debt-to-equity ratio of 0.76x is moderate and not at extreme leverage levels
Risks
- Critical interest coverage ratio of 0.5x—operatingincome covers only half of interest expense, indicating severe debt servicing risk and potential default vulnerability
- Net income collapsed 427% YoY despite 577% revenue surge, signaling profitability crisis and non-operating losses or significant charges
- Abysmal returns on equity (2.8%) and assets (0.5%) with only 9% net margin despite strong 32.8% operating margin, indicating high non-operating expenses or financial costs
- Minimal cash reserves of $124.8M relative to $4.1B liabilities and $762.9M long-term debt
Key Metrics to Watch
- Interest coverage ratio trajectory—must improve above 1.5x to indicate debt sustainability
- Net income margin recovery and reconciliation with operating income strength
- Cash position and working capital adequacy relative to debt service obligations
- Operating cash flow sustainability and debt repayment schedule
Financial Metrics
Revenue
314.5M
Net Income
28.2M
EPS (Diluted)
$0.73
Free Cash Flow
23.5M
Total Assets
5.2B
Cash
124.8M
Profitability Ratios
Gross Margin
N/A
Operating Margin
32.8%
Net Margin
9.0%
ROE
2.8%
ROA
0.5%
FCF Margin
7.5%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
0.76x
Debt/Assets
79.5%
Interest Coverage
0.53x
Long-term Debt
762.9M
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: 2026-05-09T08:07:05.021877 |
Data as of: 2026-03-31 |
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