Shares of Encore Capital Group (ECPG) have gained 11.1% over the past four weeks to close the last trading session at $39.04, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $57.25 indicates a potential upside of 46.6%.The average comprises four short-term price targets ranging from a low of $55 to a high of $61, with a standard deviation of $2.63. While the lowest estimate indi ...

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional va ...

Core Insights - Encore Capital Group, Inc. (ECPG) shares have increased by 24.3% since the release of first-quarter 2025 results, driven by rising collections and strong portfolio purchasing, although higher expenses have partially offset these gains [1] Financial Performance - ECPG reported adjusted earnings per share (EPS) of $1.93 for Q1 2025, exceeding the Zacks Consensus Estimate by 55.7% and improving from $0.95 in the prior year [1] - Revenues increased by 19.6% year over year to $392.8 million, surpassing the consensus mark by 5.5% [2] - Total debt purchasing revenues rose by 20.8% year over year to $366.7 million, while servicing revenues increased by 10.6% to $22.5 million, beating the consensus estimate of $20 million [3] Collections and Expenses - Collections grew by 18% year over year to $604.8 million, exceeding the consensus estimate of $583.3 million, supported by strong portfolio purchasing and a stable collections environment [4] - Total operating expenses rose by 8% year over year to $263.4 million, driven by increased salaries, legal collection costs, and general administrative expenses [4] Interest and Net Income - Interest expenses increased by 26.5% year over year to $70.5 million, while net income surged by 101% year over year to $46.8 million [5] - Global portfolio purchases reached $367.9 million, up from $295.7 million a year ago, with $316.4 million deployed in the United States [5] Financial Position - As of March 31, 2025, total assets were $5 billion, up from $4.8 billion at the end of 2024, while cash and cash equivalents decreased to $187.1 million [5][6] - Borrowings increased to $3.8 billion from $3.7 billion, and total liabilities rose to $4.2 billion from $4 billion at the end of 2024 [6] - Total equity increased to $819.1 million from $767.3 million at the end of 2024 [6] Share Repurchase and Guidance - ECPG repurchased $10 million worth of shares in Q1 2025 [7] - Management expects portfolio purchasing to exceed $1.35 billion in 2025 and collections to grow by approximately 11% to $2.4 billion [8] Zacks Rank - ECPG currently holds a Zacks Rank 2 (Buy) [9]

Core Viewpoint - Encore Capital Group (ECPG) has shown a significant price increase of 38.2% over the past four weeks, with a mean price target of $58.50 indicating a potential upside of 44.4% from the current price of $40.51 [1] Price Targets and Analyst Consensus - The average price target for ECPG ranges from a low of $55 to a high of $66, with a standard deviation of $5.07, suggesting a relatively high agreement among analysts [2] - The lowest estimate indicates a potential increase of 35.8%, while the most optimistic estimate suggests a 62.9% upside [2] - Analysts' price targets should be approached with caution, as they may not always accurately reflect future stock movements [3][7] Earnings Estimates and Analyst Optimism - Analysts have shown strong agreement in revising ECPG's earnings estimates higher, which is a positive indicator for potential stock upside [4][11] - The Zacks Consensus Estimate for the current year has increased by 11.8% over the past month, with three estimates revised upward and no negative revisions [12] - ECPG holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] Conclusion on Investment Potential - While the consensus price target may not be a reliable indicator of the extent of ECPG's potential gains, the direction implied by these targets appears to be a useful guide for further research [13]

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value ...

Core Insights - Encore Capital Group (ECPG) reported quarterly earnings of $1.93 per share, exceeding the Zacks Consensus Estimate of $1.24 per share, and up from $0.95 per share a year ago [1] - The earnings surprise for the quarter was 55.65%, following a previous quarter where the company reported earnings of $1.50 per share against an expectation of $1.55, resulting in a surprise of -3.23% [2] - The company generated revenues of $392.78 million for the quarter, surpassing the Zacks Consensus Estimate by 5.46%, compared to $328.39 million in the same quarter last year [3] Financial Performance - Over the last four quarters, Encore Capital Group has exceeded consensus EPS estimates two times and topped consensus revenue estimates three times [2][3] - The current consensus EPS estimate for the upcoming quarter is $1.42, with expected revenues of $385.75 million, and for the current fiscal year, the estimate is $6.02 on $1.57 billion in revenues [8] Market Position - Encore Capital Group shares have declined approximately 30.9% since the beginning of the year, contrasting with the S&P 500's decline of 4.7% [4] - The Zacks Industry Rank for Financial - Consumer Loans places it in the top 31% of over 250 Zacks industries, indicating a favorable position as the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [9] Future Outlook - The company's future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [4][5] - The current Zacks Rank for Encore Capital Group is 3 (Hold), suggesting that the shares are expected to perform in line with the market in the near future [7]

Financial Performance - Encore's portfolio purchases increased by 24% to $368 million in Q1 2025[6] - Collections increased by 18% to $605 million in Q1 2025 compared to Q1 2024[6] - EPS increased by 103.2% to $1.93 in Q1 2025 compared to $0.95 in Q1 2024[6, 32] - Cash generation for the trailing twelve months increased by 23% for Q1 2025 compared to Q1 2024[17] - The company's leverage improved to 2.6x from 2.8x year-over-year[6] Segment Performance - MCM (U.S.) portfolio purchases increased by 34% to a record $316 million in Q1 2025 compared to Q1 2024[6, 25] - MCM (U.S.) collections increased by 23% to a record $454 million in Q1 2025 compared to Q1 2024[6, 25] - Cabot (Europe) collections increased by 7% to $150 million in Q1 2025 compared to Q1 2024[6, 29] - Cabot (Europe) portfolio purchases were $51 million in Q1 2025, in line with historical trends[6, 29] Market Dynamics and Guidance - The company expects interest expense in 2025 to be $285 million[41] - The company expects the effective tax rate in 2025 to be in the mid-20's %[41] - The company reiterates its full-year guidance, expecting portfolio purchases to exceed $1.35 billion and collections to increase by 11% to $2.4 billion[41]

Financial Data and Key Metrics Changes - Portfolio purchases in Q1 were $368 million, up 24% compared to Q1 2024, while collections reached $654 million, an 18% increase [6][13][14] - Earnings per share for Q1 was $1.93, reflecting a 103% increase year-over-year [6][31] - Leverage improved to 2.6 times, down from 2.8 times a year ago [7][32] - Operating expenses increased by 8% to $263 million, indicating significant operating leverage [29] Business Line Data and Key Metrics Changes - Midland Credit Management (MCM) in the U.S. achieved record portfolio purchases of $316 million, a 34% increase year-over-year, and collections of $454 million, up 23% [9][18] - Cabot Credit Management in Europe reported portfolio purchases of $51 million and collections of $150 million, a 7% increase compared to the previous year [19][20] Market Data and Key Metrics Changes - U.S. revolving credit remains near record levels, with the credit card charge-off rate at its highest in over ten years, driving robust portfolio supply [15][16] - Delinquency rates in the U.S. are near multi-year highs, indicating favorable purchasing conditions [15][17] Company Strategy and Development Direction - The company focuses on markets with strong regulatory frameworks and stable long-term returns, primarily in the U.S. and the U.K. [12][11] - The three-pillar strategy emphasizes market focus, operational efficiency, and compliance to enhance performance and shareholder value [11][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the favorable U.S. market conditions for 2025, anticipating continued growth in portfolio purchases and collections [36][66] - The company expects global portfolio purchasing in 2025 to exceed $1.35 billion, with collections projected to grow by 11% to $2.4 billion [36] Other Important Information - The company resumed share repurchases in Q1, purchasing $10 million worth of shares [8][34] - Interest expense increased by 30% to $69 million due to higher debt balances and interest rates [30] Q&A Session Summary Question: Was the collections performance at Cabot a function of updated forecasts or underlying improvements? - Management indicated it was a combination of improved operations and updated forecasts [42] Question: What is the expected collections multiple for U.S. and Cabot? - Both MCM and Cabot had a collections multiple of 2.3 for Q1 [43] Question: Are purchasing conditions in the U.S. stable? - Management noted that purchasing conditions remain favorable, with expectations for continued strong supply [46] Question: Any volatility in collectability during Q1? - Management reported stable consumer behavior and no significant issues during tax season [47] Question: What drives the cash overs and negative revisions to forecasted recoveries? - Management explained that cash overs and NPV changes are based on different vintages and are not always directly correlated [54] Question: How should changes in recoveries impact core EPS? - Management provided an estimate that the changes in recoveries could translate to about 73 cents impact on EPS [59] Question: Will the pace of buybacks continue throughout 2025? - Future buybacks will depend on financial conditions and performance, but the current pace is expected to continue [62] Question: What is attracting the U.S. market for purchases? - The U.S. market is favorable due to high lending, elevated charge-offs, and ample supply of portfolios [66]

Financial Data and Key Metrics Changes - Portfolio purchases in Q1 2025 were $368 million, up 24% compared to Q1 2024, while collections reached $654 million, an increase of 18% [6][13][14] - Earnings per share for Q1 2025 were $1.93, reflecting a 103% increase from $0.95 in Q1 2024 [6][29] - Leverage improved to 2.6 times, down from 2.8 times a year ago, and flat compared to Q4 2024 [7][31] - Cash generation for the trailing twelve months was up 23% compared to the same period last year [14] Business Line Data and Key Metrics Changes - Midland Credit Management (MCM) in the U.S. had record portfolio purchases of $316 million, a 34% increase year-over-year, and collections of $454 million, up 23% [8][17] - Cabot Credit Management in Europe reported portfolio purchases of $51 million, consistent with historical trends, and collections of $150 million, up 7% [8][18] Market Data and Key Metrics Changes - U.S. revolving credit remains near record levels, with the credit card charge-off rate at its highest in over ten years, indicating favorable purchasing conditions [15][17] - U.S. consumer credit card delinquencies are near multi-year highs, supporting expectations for strong portfolio sales by banks and credit card issuers in 2025 [15][16] Company Strategy and Development Direction - The company focuses on markets with strong regulatory frameworks and stable long-term returns, primarily in the U.S. and the U.K. [12] - The three-pillar strategy emphasizes market focus, operational efficiency, and compliance to enhance performance and shareholder value [11][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the favorable U.S. market conditions, anticipating continued growth in portfolio purchasing and collections in 2025 [34][35] - The company expects global portfolio purchasing in 2025 to exceed $1.35 billion, with global collections projected to grow by 11% to $2.4 billion [35] Other Important Information - The company resumed share repurchases in Q1 2025, purchasing $10 million worth of shares [7][33] - Interest expense increased by 30% to $69 million due to higher debt balances and interest rates [28] Q&A Session Summary Question: Was the collections performance at Cabot a function of updated forecasts or underlying improvements? - Management indicated it was a combination of both improved operations and updated forecasts [40][41] Question: What is the expected collections multiple for U.S. and Cabot? - Both MCM and Cabot had a collections multiple of 2.3 times for Q1 [42] Question: Are purchasing conditions in the U.S. stable? - Management confirmed that purchasing conditions remain favorable, with stable delinquency and charge-off rates [44][45] Question: Any volatility in collectability during Q1? - Management reported stable consumer behavior and no significant issues during tax season [46][47] Question: What drives cash overs and negative revisions to forecasted recoveries? - Management explained that cash overs and NPV changes are based on different vintages and are not always directly correlated [53][55] Question: How should the $21.5 million of changes in recoveries be viewed from a core EPS perspective? - Management indicated that this could translate to about 73 cents impact on EPS, but emphasized the strong collections performance [58][60] Question: Will the pace of buybacks continue throughout 2025? - Future buybacks will depend on financial conditions and market opportunities, but the company has resumed repurchases as planned [61][63] Question: What is attracting the U.S. market for purchases going forward? - Management noted ample supply and strong returns, with expectations for record purchasing in 2025 [67][68] Question: Any unusual mix between new payment plans and one-time payments during Q1? - Management confirmed that there were no unusual changes in payment types, with consistent performance across all channels [72][74] Question: How long before a newly acquired bank might start selling into the market? - Management suggested it would take time for any new seller to align strategies and begin selling, indicating a gradual process [76][77]

PART I – FINANCIAL INFORMATION [Item 1— Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201%E2%80%94%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Q1 2025 reflect significant growth in net income and total revenues, driven by increased debt purchasing and portfolio expansion [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets reached $4.97 billion, driven by increased receivable portfolios, while liabilities grew to $4.15 billion due to higher borrowings Condensed Consolidated Statements of Financial Condition (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$4,969,586** | **$4,789,729** | | Receivable portfolios, net | $3,952,531 | $3,776,369 | | Goodwill | $519,410 | $507,808 | | **Total Liabilities** | **$4,150,525** | **$4,022,398** | | Borrowings | $3,790,698 | $3,672,762 | | **Total Stockholders' Equity** | **$819,061** | **$767,331** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Total revenues increased to $392.8 million, leading to a more than doubling of net income to $46.8 million for Q1 2025 Three Months Ended March 31, (in thousands, except per share amounts) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $392,775 | $328,386 | | Total debt purchasing revenue | $366,682 | $303,443 | | Income from operations | $129,343 | $83,591 | | Net income | $46,796 | $23,239 | | Diluted EPS | $1.93 | $0.95 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated $45.3 million, while investing activities used $100.3 million, resulting in a net decrease in cash and equivalents Cash Flow Summary for Three Months Ended March 31, (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $45,283 | $50,984 | | Net cash used in investing activities | ($100,278) | ($90,882) | | Net cash provided by financing activities | $40,337 | $55,790 | | **Net (decrease) increase in cash** | **($14,658)** | **$15,892** | | **Cash and cash equivalents, end of period** | **$187,117** | **$172,990** | - Purchases of receivable portfolios were a primary use of cash, totaling **$362.7 million** in Q1 2025, an increase from $291.4 million in Q1 2024[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover accounting policies, business operations, share repurchases, receivable portfolios, borrowings, and confirm no new material legal proceedings - The company operates as an international specialty finance company, purchasing and managing portfolios of defaulted consumer receivables through its main subsidiaries, MCM in the U.S. and Cabot in Europe[22](index=22&type=chunk)[23](index=23&type=chunk) - During Q1 2025, the company repurchased **289,425 shares** of common stock for approximately **$10.0 million** under its share repurchase program[34](index=34&type=chunk) Change in Receivable Portfolios, Net (in thousands) | Description | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Beginning Balance | $3,776,369 | $3,468,432 | | Portfolio Purchases | $367,851 | $295,714 | | Collections Applied | ($259,589) | ($195,035) | | Changes in Recoveries | $21,464 | ($12,409) | | **Ending Balance** | **$3,952,531** | **$3,531,387** | Consolidated Borrowings (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Global senior secured revolving credit facility | $916,409 | $865,365 | | Senior secured notes | $1,880,143 | $1,846,047 | | Convertible senior notes | $330,000 | $330,000 | | Other | $397,502 | $384,041 | | **Total (before debt costs)** | **$3,824,851** | **$3,710,018** | - As of March 31, 2025, the company had forward flow purchase agreements for nonperforming loans with an estimated minimum aggregate purchase price of approximately **$534.9 million**[106](index=106&type=chunk) [Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202%20%E2%80%93%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management highlights strong Q1 2025 performance driven by robust U.S. portfolio purchasing, increased collections, and revenue growth, while maintaining sufficient liquidity [Purchases and Collections](index=25&type=section&id=Purchases%20and%20Collections) Portfolio purchases rose to $367.9 million, primarily from U.S. market strength, driving an 18.4% increase in gross collections to $604.8 million - In the U.S., market supply for defaulted consumer receivables remains at a record level, with issuers predominantly selling fresh portfolios, leading to favorable pricing conditions for Encore[131](index=131&type=chunk) Purchases of Receivable Portfolios by Location (in thousands) | Location | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | MCM (United States) | $316,366 | $236,509 | | Cabot (Europe) | $51,485 | $59,205 | | **Total** | **$367,851** | **$295,714** | Total Collections by Geographic Area (in thousands) | Location | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | MCM (United States) | $454,025 | $369,478 | | Cabot (Europe) | $149,976 | $140,697 | | **Total** | **$604,807** | **$510,887** | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Total revenues surged 19.6% to $392.8 million, driven by debt purchasing and positive recovery changes, while operating income grew 54.7% Revenue Breakdown (in thousands) | Revenue Component | Q1 2025 | Q1 2024 | $ Change | | :--- | :--- | :--- | :--- | | Portfolio revenue | $345,218 | $315,852 | $29,366 | | Changes in recoveries | $21,464 | ($12,409) | $33,873 | | **Total debt purchasing revenue** | **$366,682** | **$303,443** | **$63,239** | | Servicing revenue | $22,547 | $20,379 | $2,168 | | **Total revenues** | **$392,775** | **$328,386** | **$64,389** | - Collections over-performed forecasts by approximately **$27.0 million** in Q1 2025, contributing significantly to the positive 'Changes in recoveries' revenue line item[149](index=149&type=chunk) Operating Expenses (in thousands) | Expense Component | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $105,932 | $104,184 | 1.7% | | Cost of legal collections | $68,013 | $58,721 | 15.8% | | General and administrative | $41,018 | $36,241 | 13.2% | | **Total operating expenses** | **$263,432** | **$244,795** | **7.6%** | - Interest expense increased by **$14.8 million (26.5%)** YoY, driven by a higher average debt balance (contributing **$6.7 million**) and rising interest rates (contributing **$8.6 million**)[166](index=166&type=chunk)[169](index=169&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$378.6 million** available under its Global Senior Facility and repurchased **$10.0 million** in common stock during Q1 2025 - The company is in material compliance with all debt covenants and had **$378.6 million** of available capacity under its Global Senior Facility as of March 31, 2025[196](index=196&type=chunk) - Under its $300 million share repurchase program, the company bought back **289,425 shares** for approximately **$10.0 million** in Q1 2025. As of March 31, 2025, **$81.9 million** remained authorized for future repurchases[197](index=197&type=chunk) [Item 3 – Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure, including foreign currency and interest rates, were reported as of March 31, 2025 - There were no material changes in the company's foreign currency or interest rate risk profiles during the first quarter of 2025[204](index=204&type=chunk)[205](index=205&type=chunk) [Item 4 – Controls and Procedures](index=41&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO have concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[209](index=209&type=chunk) - No material changes were made to the internal control over financial reporting during the quarter ended March 31, 2025[210](index=210&type=chunk) PART II – OTHER INFORMATION [Item 1 – Legal Proceedings](index=42&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) No material developments or new legal proceedings were reported during the quarter, as detailed in the financial statements - There were no material developments in legal proceedings during the three months ended March 31, 2025[102](index=102&type=chunk)[213](index=213&type=chunk) [Item 1A – Risk Factors](index=42&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) No material changes to the company's previously disclosed risk factors were reported for the quarter - No material changes to the company's risk factors were reported for the quarter[215](index=215&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **289,425 shares** for **$10.0 million** in Q1 2025, with **$81.9 million** remaining under its share repurchase program Issuer Repurchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 0 | N/A | $91,926,255 | | Feb 2025 | 7,636 | $36.41 | $91,648,258 | | Mar 2025 | 281,789 | $34.51 | $81,922,587 | | **Total** | **289,425** | **$34.56** | **$81,922,587** |