Critical Survey: Encore Capital Group (ECPG) and Nicholas Financial (NICK)

Encore Capital Group (NASDAQ: ECPG) and Nicholas Financial (NASDAQ:NICK) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, profitability, dividends, valuation, analyst recommendations, risk and earnings.

Institutional and Insider Ownership

55.4% of Nicholas Financial shares are held by institutional investors. 8.8% of Encore Capital Group shares are held by insiders. Comparatively, 29.6% of Nicholas Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Encore Capital Group and Nicholas Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Encore Capital Group 6.68% 18.81% 2.49%
Nicholas Financial -3.23% 0.54% 0.19%

Valuation & Earnings

This table compares Encore Capital Group and Nicholas Financial’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Encore Capital Group $1.19 billion 0.88 $83.22 million $4.01 10.10
Nicholas Financial $90.47 million 0.76 $5.40 million N/A N/A

Encore Capital Group has higher revenue and earnings than Nicholas Financial.

Risk and Volatility

Encore Capital Group has a beta of 1.64, meaning that its stock price is 64% more volatile than the S&P 500. Comparatively, Nicholas Financial has a beta of 0.57, meaning that its stock price is 43% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Encore Capital Group and Nicholas Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Encore Capital Group 0 2 3 0 2.60
Nicholas Financial 0 0 0 0 N/A

Encore Capital Group presently has a consensus price target of $52.63, suggesting a potential upside of 29.94%. Given Encore Capital Group’s higher probable upside, equities analysts clearly believe Encore Capital Group is more favorable than Nicholas Financial.

Summary

Encore Capital Group beats Nicholas Financial on 9 of the 12 factors compared between the two stocks.

Encore Capital Group Company Profile

Encore Capital Group, Inc., a specialty finance company, together with its subsidiaries, provides debt recovery solutions and other related services for consumers across a range of financial assets worldwide. The company purchases portfolios of defaulted consumer receivables at deep discounts to face value, as well as manages them by working with individuals as they repay their obligations and works toward financial recovery. It is also involved in the debt collection and management activities; and the management of non-performing loans. In addition, the company provides portfolio management services to banks for non-performing loans; and financial solutions to individuals who have previously defaulted on their obligations. Further, it focuses on consumer non-performing loans, including insolvencies, and bank and non-bank receivables. Encore Capital Group, Inc. was founded in 1998 and is headquartered in San Diego, California.

Nicholas Financial Company Profile

Nicholas Financial, Inc. operates as a specialized consumer finance company in the United States. The company engages in acquiring and servicing automobile finance installment contracts for the purchase of new and used automobiles and light trucks. It also originates direct consumer loans and sells consumer-finance related products. The company operates through 65 branch offices located in Alabama, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Michigan, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, and Virginia. Nicholas Financial, Inc. was founded in 1986 and is headquartered in Clearwater, Florida.

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