- Encore Capital is a debt buyer based in the United States. It is ranked as the first player in the U.S. and U.K. in terms of dollars collected.
- In 2021, the company reported fewer borrowings and fewer investments in receivable portfolios. In light of these figures, I will be assuming that the company is collecting more cash.
- I tried to be very conservative when I chose the exit multiple. Other competitors trade at 102x-11x FCF, so I believe that 19x FCF is quite acceptable.
- I also assumed depreciation of $42-$47 million, conservative change in working capital, and capital expenditures of $51-$47 million. The result is a free cash flow of $419-$389 million from 2022 to 2025.
- In my view, the Board of Directors believes that the shares are undervalued. They wouldn’t be buying $300 million in stock if financial advisors inside Encore believed that the shares are expensive.
For further details see:
Encore Capital: With 13% More Debt Collections, It Looks Like A Buy