World Acceptance Corp. – Value |
World Acceptance Corporation (WRLD) is stepping in to provide credit to the little guys when the big banks cannot. This Zacks #1 Rank (strong buy) had record earnings in the fiscal fourth quarter. Yet shares are still cheap, with a forward P/E of just 10.5.
World Acceptance specializes in short-term small loans, medium-term larger loans, and related credit insurance products to individuals with limited access to sources of consumer credit in 12 states and Mexico.
The company is also the parent company of ParaData Financial Systems which provides software solutions for the consumer finance industry.
Record Earnings and Revenue in the Fourth Quarter
On Apr 28, World Acceptance reported fiscal fourth quarter results which were some of the best in its history.
It surprised on the Zacks Consensus by a penny, as earnings per share were a record $2.11 compared to the consensus of $2.10.
Revenue jumped 10.5% to a record $136.9 million from $123.9 million in the prior year's fourth quarter on increased loan demand across its markets.
Interest and fee income rose 14.4$, as net average loans climbed 14.7%. Insurance commissions and other income actually declined by 6.4% to $21.6 million due to a 24% reduction in the number of tax returns prepared by the company.
Competitors were taking market share due to paying anticipation loans. World Acceptance expects this playing field to level out next year when anticipation loans will not be available from ANY tax preparers.
The company is still managing its bad debt costs. It has seen 8 consecutive quarterly year over year decreases in charge-offs as a percentage of net loans. This quarter, it fell to 13.1% from 13.6% in the fourth quarter of 2010.
Record Full Year Earnings
For the year, earnings rose 26.5% to a record $5.63 per share. This is year over year earnings growth of 29% as the company made just $4.32 per share in fiscal 2009.
Revenue climbed 11.5% to $491.4 million. Gross loan balances also gained 13.6% to $875 million.
Double Digit Earnings Growth Expected Again
World Acceptance has seen double digit earnings growth every year since 2007. That's a strong track record given the great recession and financial crisis.
Analysts are bullish again on fiscal 2012. The 2012 Zacks Consensus Estimate has risen to $6.37 from $6.33 in the last 90 days, which is further earnings growth of 13.1%.
Fiscal 2013 is expected to see further 14.2% growth, as the Zacks Consensus rose to $7.27 from $7.14 per share in the prior 3 months.
You can see the tremendous earnings growth over the last 5 years in this chart. It is just slowly going up year over year. Very few charts from the last 5 years look like this- due to earnings crashing during the recession.
Share Repurchase Program
The company doesn't pay a dividend, but it has been repurchasing shares. During the fourth quarter, it repurchased $17.4 million. For the full year, it bought $53.3 million of company stock.
It is still authorized to purchase another $25.2 million under its current program.
Attractive Valuations
In addition to having a P/E under 15, which normally means "value", World Acceptance also has a price-to-book ratio of 2.4, well under the 3.0 cut off for value.
Additionally, the company has a stellar return on equity (ROE) of 22.3%.
World Acceptance is cashing in on strong demand for small loans. The company is scheduled to report first quarter results on July 27. Will it be another record quarter?
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