World Acceptance Corp. - Value

The financial crisis didn't wipe out all small lending. World Acceptance Corporation (WRLD) reported record results in the second quarter as it surprised on the Zacks Consensus by 15.2%. Shares are cheap, trading at just 9.7x forward estimates.

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 11 states and Mexico.

The company is also the parent company of ParaData Financial Systems which provides software solutions for the consumer finance industry.

Record Fiscal Second Quarter Results

On Oct 26, World Acceptance reported record fiscal second quarter results. Earnings per share were $1.21 which crushed the Zacks Consensus Estimate of just $1.05. It was the third beat out of the last 4 quarters. World Acceptance made just 89 cents a year ago.

Revenue jumped 13.3% to $118.1 million from $104.2 million in the fiscal second quarter of 2010. The quarter was boosted by 14.2% increase in average net loans along with the associated growth in interest and fees.

Gross loans jumped 15% to $868.2 million from $754.9 million last year. Interest and fees rose 13.3% to $103.7 million from $91.5 million in the year ago period.

On the loss side of the equation, conditions continued to improve. The net charge-offs as a percentage of average net loans returned to near historical levels of 14.8% on an annualized basis compared to 16.2% in the second quarter of last year.

Past due loans, those delinquent more than 61 days, also decreased to 4.2% from 4.6% on a contractual basis.

Zacks Consensus Estimates Climb

Analysts liked what they heard in October, as the fiscal 2011 Zacks Consensus Estimate rose to $5.55 from $5.15 per share 60 days ago. This is earnings growth of 26.9%.

Things are looking bullish for fiscal 2012 as well, as 2 estimates have moved higher in just the last 30 days, pushing the Zacks Consensus up to $6.21 from $5.91 per share in that time.

This would be further earnings growth of 12%.

World Acceptance is scheduled to report fiscal third quarter results on Jan 27, 2011.

World Acceptance is a Value Stock

Despite shares being at 5-year highs, World Acceptance is still a value stock.

In addition to a low P/E, World Acceptance has a price-to-book ratio of just 2.2 which is well within the value parameters of under 3.0.

The company also has an outstanding return on equity (ROE) of 22%.

World Acceptance is a Zacks #1 Rank (strong buy).

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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