CompuCredit (CCRT) Update
Last Friday, CCRT announced the acquisition of ACC Consumer Finance along with $275 million of subprime auto finance receivables and a $195 million auto loan portfolio. Not many details were available, but CS raised EPS estimates by 10 cents to $4.35 and $4.95 for 2007 and 2008 respectively. CS also estimates that this acquisition represents about 10-15% of CCRT’s excess liquidity, so similar deals could be significantly accretive to earnings and yet the stock is still selling at about $36 or just 8.2 times 07 estimates.
One reason the stock has a depressed multiple is because 8.72m of the 20.77m floating shares (42%) have been shorted. This is an extremely high short interest to float ratio. If the company comes through with their projected earnings and provides reasonable guidance after the close of market on Feb 13th, I suspect the stock will have a nice rally, maybe even a huge rally in the event of a short squeeze. I can only speculate as to why the shorts are attacking this company, but my guess is that they see a lot of risk in the regulatory environment. Payday lenders in particular are receiving a lot of scrutiny by lawmakers. Hopefully the politicians will not destroy industry profitability.
One reason the stock has a depressed multiple is because 8.72m of the 20.77m floating shares (42%) have been shorted. This is an extremely high short interest to float ratio. If the company comes through with their projected earnings and provides reasonable guidance after the close of market on Feb 13th, I suspect the stock will have a nice rally, maybe even a huge rally in the event of a short squeeze. I can only speculate as to why the shorts are attacking this company, but my guess is that they see a lot of risk in the regulatory environment. Payday lenders in particular are receiving a lot of scrutiny by lawmakers. Hopefully the politicians will not destroy industry profitability.
posted by Never-Limp at 1:44 PM
2 Comments:
why would shorts cover based on the company reaffirming guidance next week?
I think it'll take them nailing the 1st q 07 before we get a big move
seems pretty likely for them to do so esp with the acquisistions...even though i read the csfb note as a wild guess
Well, I don't really understand why the shorts have shorted to begin with, so I can only speculate as to why they might cover, but they will have to cover at some point if earnings continue to ramp strongly.
I wouldn't call it a wild guess, they assume a 4-5% ROA which is the industry average and management has a history of not overpaying for deals.
Post a Comment
<< Home