Consumer Portfolio Story Overview

CPSS -- USA Stock  

USD 3.87  0.02  0.52%

Macroaxis News
  
By David Taylor

Consumer Portfolio Services is a consumer financial company.  The company purchases contracts from auto dealerships that those dealers financed.  However, the company focuses mainly on what would be considered the “sub-prime” of auto loans.  The consumers that are being financed have either no credit or bad credit.  

If there was any hesitation with investing in a company such as Consumer Portfolio, that is understandable.  After all, wasn’t the sub-prime the reason that the financial crisis occurred?  Yes.  But, these are different times.  

Banking
Fama & French Classification
A subprime auto lender with strong earnings at a bargain price.

Is it time to get back into sub-prime?  How about sub-prime auto loans.  With the economy expanding as it has been Americans are earning more.  In that type of environment, credit defaults decline providing a more secure environment for the sub-prime auto loan industry.  CPSS is a company that is positioned well for the economic expansion.  And, it is an unbelievable bargain.  




Consumer Portfolio Services is a consumer financial company.  The company purchases contracts from auto dealerships that those dealers financed.  However, the company focuses mainly on what would be considered the “sub-prime” of auto loans.  The consumers that are being financed have either no credit or bad credit.  

If there was any hesitation with investing in a company such as Consumer Portfolio, that is understandable.  After all, wasn’t the sub-prime the reason that the financial crisis occurred?  Yes.  But, these are different times.  

First, you cannot look at a company as just this company.  What you need to do is look at the company along with the environment that it is working within.  The economy is expanding.  That translates into more jobs, something that we saw just this morning with the release of better-than-expected jobs data.  Since more people are working this means more people are spending money from their new jobs.  That creates a bigger push within the economy.  There are a lot of people working only marginally, such as part-time.  These individuals will be pulled into the ranks of full-time very shortly as business ramp up to meet the demands.  

These marginally credit-rated consumers are going to be in a better position to pay their bills, reducing their credit risk.  But, that does not mean they will necessarily sell their cars and then refinance their loans.  They will be earning more and continue to pay their bills.  These consumers will feel empowered to improve their credit since they are earning more.  In other words, with the economy expanding I see a bigger opportunity for this company to improve its bottom line with very little risk.  

But, the bottom line with CPSS is already incredibly impressive.  The company’s stock is trading at roughly $5.00 per share.  They have a market capitalization of $119 million, a smallish company.  but, here are the earnings for CPSS over the past several years:

2012:  $3.56

2013:  $0.98

2014:  $1.18

2015:  $1.34

The company earned $1.34 in the previous year and is slated to improve upon that.  I will repeat this:  the stock is trading at $5.00 per share.  If you bought this stock you would essentially be earning well over 25% from earnings.  That is unheard of from a company that is putting out earnings at such a high ratio.  The industry average is 26.91 EPS ratio.  

Likewise, other metrics are below average with the company.  For instance, Price to cash flow is 0.70 for CPSS whereas the industry average is 17,43.  Many instances with this company the metrics fall way short of where it should be in comparison to the rest of the industry.  

Considering the comparisons of this company versus the industry, at some point investors are going to stop buying stocks at such high ratios.  Instead, they will start looking for bargains.  CPSS is a company that fits the mold for investors to seek out and invest in.  This will drive up the stock price to at a minimum the average earn gins per share price.  That would push this company’s stock up to about $15.00 per share.  That would be a 200% move in the stock price just to get to the stock market’s average.  

The earnings on this company have been strong and will move higher given the economic landscape we are in.  Plus, the bargain price makes this stock an irresistible buy.  This is one stock you would want to put into your portfolio with very high expectations because once the market starts taking a hard look at this stock it will be moving. 

Story Momentum

This media report from Macroaxis distributed on February 3, 2017 was a factor to the next trading day price appreciation.The overall trading delta against the next closing price was 1.00% . The overall trading delta when the story was published against the current closing price is 19.58% .

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Consumer Portfolio is currently under evaluation in total debt category among related companies. Total Debt refers to the amount of long term interest-bearing liabilities that a company carries on its balance sheet. That may include bonds sold to public, notes written to banks or capital leases. Typically, debt can help a company magnify its earnings, but the burden of interest and principle payments will eventually prevent the firm from borrow excessively.
Check also Consumer Portfolio Hype Analysis, Consumer Portfolio Correlation and Consumer Portfolio Performance. Please also try Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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