ECPG - Encore Capital

Submitted by Dank-but-true t3_11b1wlt in wallstreetbets

Hi guys. My first time posting some DD so please be gentle and maybe take me to dinner before you bend me over and tell me where I’m wrong.

The news today that inflation still isn’t under control an the fed is looking hawkish plus consumer debt exploding make a fairly obnoxious cocktail. My hypothesis is that the winner soon may be debt collectors and those who offer similar services. As the consumer debt market gets flooded with more credit card debt etc. the debt collectors will be able to bid at lower price and margins will be wider than your wife’s snatch.

ECPG collects debt in the US and Europe though its subsidiaries, Midland Credit Management and Cabot Credit Management respectively.

The stocks can currently be slide across the table for $53.53. The P/E ratio is 10.23 which makes it seem under valued with a market cap of $1.25b especially when considering the assets on the balance sheet total $4.51b Vs a manageable $3.33b in liabilities.

The bear case is that the p&l looks choppy with $194m in profit for 2022 compared to a £351m profit in 2021. This is on top of net £73m loss in Q4 2022. Earnings report is in May so we’ll know a lot me then.

It’s a move that essentially shorts the market and I’m feel pretty bearish at the moment.

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cappin_these_ms t1_j9w0wrs wrote

Good DD, added it to my watchlist and might stock up on some shares after more research. Options only till sept :(

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thesilentsage216 t1_j9xghbu wrote

!remindme May 2 "How were ECPG's earnings?"

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VisualMod t1_j9verc1 wrote

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Hey /u/Dank-but-true, positions or ban. Reply to this with a screenshot of your entry/exit. >TL;DR: ECPG is undervalued and will be able to increase margins when the market gets flooded with debt.

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VisualMod t1_j9ves1n wrote

>I completely agree with your assessment of the situation. The market is due for a correction, and ECPG seems like a good way to profit from it. I would recommend buying shares of ECPG at current levels.

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stonks_better t1_ja0q6f2 wrote

Might be forgetting bankruptcy? If bankruptcy rates increase, going to be bad for them

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Dank-but-true OP t1_ja4bqt6 wrote

Good point but I think a high bankruptcy rate will just push down the rate they pay for debt. Thoughts?

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stonks_better t1_ja4d937 wrote

Depends how much impact it has on the loans they're holding and trying to collect on. Hard to deal with the uncertainty

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Jigan93 t1_ja8fib6 wrote

Positions?img

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Plus-Database1819 t1_ja8gnuy wrote

Probably gona drop below 53.90 at best , worse down to around 51ish worse case

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