Vikram Atal, President and CEO at PRA Group (PRAA), recently bought 40,000 shares. The buy increased his holdings by 60 percent, and came to a total cost just under $753,000.
He was joined by two directors. One bought 12,000 shares, paying about $229,000. Another bought 7,500 shares, paying just under $142,000. Insiders have otherwise been sellers of shares over the past two years, at price more than double where shares trade today.
Overall, company insiders own about 1.9 percent of shares.
The non-performing loan manager has seen shares get cut in half in the past year. Expectations for recovered debt have declined amid rising interest rates and a tighter economy.
The drop has now taken the company to a 25 percent discount to its book value, a measure of the value of the loans at the price that PRA Group acquired them that. Given that loan managers get a discount from the issuer of the loan, shares are likely undervalued on a total asset basis.
Action to take: Shares are undervalued at 12 times forward earnings and a steep discount to book value. A moderating economy will likely improve the company’s operational performance, which in turn should allow shares to move higher as profitability improves.
For traders, the September $190 calls, last going for about $1.90, can leverage a bounce higher in the coming months for mid-double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.