Encore Capital (ECPG) AI Stock Analysis

• Market Cap: $835.93M
• Dividend Yield: N/A
• Average Volume (3M): 308.90K
• Price to Earnings (P/E): ―
• Beta (1Y): 1.10
• Revenue Growth: 6.78%
• EPS Growth: 33.06%
• Country: US
• Employees: 7,350
• Sector: Financial
• Sector Strength: 85
• Industry: Financial - Mortgages
• EPS (TTM): -9.42
• Shares Outstanding: 23,448,221
• 10 Day Avg. Volume: 261,456
• 30 Day Avg. Volume: 308,901
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 5.60
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 5.24
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $59.33
• Price Target Upside: 67.13% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 3

Encore Capital's overall score is primarily impacted by weak financial performance, with declining profitability and negative net income. While technical indicators suggest a bearish trend, the valuation score is low due to the negative P/E ratio. However, the earnings call highlighted some positive aspects such as strong U.S. market performance and improved leverage, providing a slight boost to the overall score. The absence of a dividend yield and challenges in European operations remain significant concerns.

Positive Factors

Earnings

Encore Capital Group closed out 2024 with record collections and purchases in the fourth quarter, positioning the business as a cyclical winner.

Financial Performance

Strong full-year purchasing and collections guidance exceeded expectations, indicating robust financial performance.

Market Conditions

Management conveyed a robust purchasing environment in the U.S. market, with supply at record levels, and raised its purchasing outlook.

Negative Factors

Asset Impairment

Encore Capital Group reported a significant non-cash goodwill impairment at its European Cabot business.

Market Competition

The UK and European markets remain competitive, and pricing is not yet reflecting higher cost of capital.

One-Time Expenses

A variety of one-time expenses in the fourth quarter had a $262 million impact on results.

Encore Capital Business Overview & Revenue Model

Company Description

Encore Capital Group, Inc. (NASDAQ: ECPG) is a leading global specialty finance company providing debt recovery solutions for consumers and property owners across a diverse range of financial assets. Headquartered in San Diego, California, Encore Capital operates in several countries and focuses on purchasing portfolios of defaulted consumer receivables from major banks, credit unions, utility companies, auto finance companies, and retail credit providers. The company employs a data-driven approach to debt collection, utilizing advanced analytics and a consumer-centric approach to maximize recovery efforts while maintaining a commitment to fair and ethical practices.

How the Company Makes Money

Encore Capital Group generates revenue primarily by purchasing defaulted consumer debt portfolios at a significant discount to their face value and subsequently collecting payments on those debts. The company's revenue model hinges on its ability to recover more from these debt portfolios than the purchase price, effectively creating a margin between the acquisition cost and the collected amount. Encore Capital leverages proprietary analytics and technology to assess the value of debt portfolios and optimize collection strategies. The company also benefits from economies of scale and operational efficiencies, which enhance its profitability. Additionally, Encore Capital has strategic partnerships with financial institutions and other lenders, enabling consistent access to a supply of charged-off debt, which is crucial for sustaining its business operations.

Encore Capital Financial Statement Overview

Summary

Encore Capital faces challenges in maintaining profitability, evident from negative net income and declining margins. The balance sheet strength improved with debt reduction, though the negative ROE is a concern. Cash flow stability offers some reassurance, but overall financial health requires addressing revenue growth and profitability constraints.

Income Statement

The company has shown fluctuating revenue with a decline in recent years from 2020 to 2023, although a slight recovery is noted in 2024. Gross profit margin has decreased, indicating cost pressures. Net income has been negative for the past two years, signaling challenges in profitability. The EBIT margin is low, and the EBITDA margin turned negative in 2024, raising concerns about operational efficiency.

Balance Sheet

The balance sheet shows a moderate equity position with a debt-to-equity ratio improving due to the reduction of total debt to zero by 2024. However, the return on equity is negative in the last two years, highlighting profitability issues. The equity ratio has been stable, suggesting a balanced asset structure.

Cash Flow

Operating cash flow has been stable, but free cash flow growth is inconsistent. The operating cash flow to net income ratio is high due to negative net income, indicating issues with profit conversion. The free cash flow to net income ratio shows better performance, driven by effective capital expenditure management.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
1.32B	1.22B	1.40B	1.61B	1.50B
	Gross Profit
893.45M	571.24M	769.70M	927.98M	834.40M
	EBIT
157.33M	16.54M	462.17M	633.27M	533.56M
	EBITDA
188.76M	63.35M	510.72M	683.35M	579.29M
	Net Income Common Stockholders
-139.24M	-206.49M	194.56M	350.78M	211.85M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
199.87M	158.36M	143.91M	189.65M	189.18M
	Total Assets
4.79B	4.63B	4.51B	4.61B	4.86B
	Total Debt
3.67B	3.32B	3.98B	3.00B	3.28B
	Net Debt
3.47B	3.16B	3.84B	2.81B	3.09B
	Total Liabilities
4.02B	3.69B	3.33B	3.42B	3.64B
	Stockholders Equity
767.33M	936.54M	1.18B	1.19B	1.22B
Cash Flow		Free Cash Flow
127.16M	101.28M	173.46M	269.68M	278.26M
	Operating Cash Flow
156.17M	152.99M	210.68M	303.05M	312.86M
	Investing Cash Flow
-440.43M	-401.94M	-130.24M	339.90M	82.83M
	Financing Cash Flow
317.77M	268.30M	-107.44M	-655.69M	-403.20M

Encore Capital Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 35.50
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ECPG, the sentiment is Neutral. The current price of 35.5 is above the 20-day moving average (MA) of 32.05, above the 50-day MA of 34.52, and below the 200-day MA of 44.70, indicating a neutral trend. The MACD of 0.24 indicates Negative momentum. The RSI at 57.35 is Neutral, neither overbought nor oversold. The STOCH value of 86.28 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ECPG.

Encore Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
VEL	68 Neutral	$624.73M	8.94	13.62%	―	32.62%	16.91%
WD	67 Neutral	$2.52B	25.44	5.62%	3.53%	7.09%	6.18%
Sector *	64 Neutral	$12.61B	9.79	7.95%	16985.69%	12.77%	-3.98%
PFSI	61 Neutral	$5.07B	15.06	9.32%	1.12%	23.79%	121.61%
GHLD	61 Neutral	$781.68M	8.08	7.97%	3.96%	40.27%	―
ECPG	48 Neutral	$835.93M	―	-16.34%	―	6.78%	33.06%
LDI	48 Neutral	$377.52M	―	-31.41%	―	3.76%	16.19%

Encore Capital Corporate Events

Encore Capital Appoints Tomas Hernanz as CFO

Encore Capital Group, Inc. announced a leadership transition effective April 1, 2025, with Tomas Hernanz appointed as Executive Vice President, Chief Financial Officer, and Treasurer, succeeding Jonathan Clark. Hernanz, who has been with the company’s European unit since 2016, brings extensive experience from previous roles at Cabot Credit Management, Ondra Partners, Goldman Sachs, and Citigroup. This transition is part of a strategic move to strengthen the company’s financial leadership. Additionally, Jonathan Clark will continue to support the company as a senior advisor for a 24-month period, ensuring a smooth transition and continuity in the company’s financial strategies.

Encore Capital Reports Strong Q4 2024 Growth

On February 26, 2025, Encore Capital Group, Inc. released its fourth-quarter 2024 investor presentation, highlighting significant growth driven by its U.S. business. The company reported a 26% increase in portfolio purchases, a 16% rise in collections, and a 20% boost in cash generation for 2024. Despite challenges with its European subsidiary, Cabot, Encore implemented restructuring actions and achieved an 8% increase in collections. The company plans to resume share repurchases in 2025, indicating a positive outlook for future performance.