ENCORE CAPITAL GROUP, INC. (ECPG): what the price requires
The current priced-in claim for ENCORE CAPITAL GROUP, INC. (ECPG) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/ECPG
Headline
| Field | Value |
|---|---|
| Ticker | ECPG |
| Company | ENCORE CAPITAL GROUP, INC. |
| Current price | $91.07/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 64.4% |
| Operating margin today | 36.0% |
| Margin expansion implied | +28.4pp |
| Multiple paid | 3x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 10.2% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.72σ |
| cohort percentile (of 16 peers) | 6 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.63x | 5 | justifies |
| Earnings | 0.50x | 3 | justifies |
| Relative | 0.42x | 4 | justifies |
| Growth | 0.46x | 2 | justifies |
Families that justify the price: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 4.0%); the inversion above states its own rate.
Per-Model Detail (n=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | — |
| DCF Exit Multiple | Growth | $301.86 | 0.30x | yes | Exit EV/EBITDA: 5.2x / 8.2x / 11.2x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $191.16 | 0.48x | yes | P/E 12x (static sector reference · 2026-04), scenarios: 9.6x / 12.0x / 14.4x (bear / base = reference held flat / bull), EV/EBITDA N/Ax |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $143.51 | 0.63x | yes | BV/sh $46.36, ROE (TTM) 28.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $258.46 | 0.35x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $149.48 | 0.61x | yes | Rev $1.9B, growth 30% (input: historical growth; tapered), Terminal P/S: 0.9x / 1.1x / 1.3x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $154.08 | 0.59x | yes | EPS $12.84, growth 1% (input: historical EPS growth), PEG=5.80 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $181.94 | 0.50x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.39B × (1−23%) / WACC 4.0% → EPV (no growth) |
| Residual Income | Asset | $217.22 | 0.42x | yes | BV $46.36 + 5yr PV of (ROE (TTM) 28.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $115.73 | 0.79x | yes | √(22.5 × EPS $12.84 × BVPS $46.36) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | $0.01 | 9107.00x | yes | FCF $166.1M / Kₑ 9.3% — zero-growth perpetuity (excluded from median) |
| SBC-Adj FCF Yield | Earnings | $0.01 | 9107.00x | yes | SBC-adj FCF $0.15B (FCF $0.17B − SBC $0.02B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | $414.30 | 0.22x | yes | EPS $12.84 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $33.76 | 2.70x | yes | BV $46.36 × (ROIC 2.9% / WACC 4.0%) |
| P/Sales Sector | Relative | $248.85 | 0.37x | yes | Revenue $1.85B × sector P/S 3.0x |
| PEG Fair Value | Relative | $481.50 | 0.19x | yes | EPS $12.84 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $138.81 | 0.66x | yes | EPS $12.84 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $3.8b |
| Net debt / NOPAT (after-tax) | 7.74x |
| Net debt / operating income (pre-tax) | 5.97x |
| Interest coverage | 2.2x |
| Share count CAGR (buyback) | -5.1% |
| Burning cash | no |
Bullet Takeaways
Encore trades around $82.97, roughly 6.5x trailing EPS of $12.84 and about 3x company-wide operating income, a multiple so low the price sits below what even a 5% annual profit decline would warrant; nearly every valuation model marks it far higher, from a Graham floor near $116 to relative and asset frames near $191 to $258.
The business is posting records, not declines: first-quarter 2026 EPS doubled to $3.86, net income rose 84%, collections hit a record $718 million, and management raised the 2026 collections target to $2.8 billion and EPS guidance to roughly $13, while the share count falls about 5% a year.
The discount is compensation for real risk: as a debt buyer its earnings rest on charge-off supply that moves with the consumer-credit cycle, the balance sheet carries net debt above 5x operating income with interest coverage of only about 2.3x, and recovery accounting depends on the company's own estimates of future collections.
Bull Case
The counterintuitive thing about Encore Capital is that it is posting record results and trading like a company in decline. First-quarter 2026 diluted EPS doubled to $3.86 from $1.93, net income jumped 84% to $86.2 million, revenue rose 21% to $475.4 million, and global collections hit a record $718.4 million, up nearly 19%. Yet the stock changes hands at about $82.97 (June 27, 2026), roughly 6.5x trailing EPS of $12.84 and a fraction of where almost every valuation model marks it. That is the metric that does not fit the obvious narrative: a business compounding collections at a record pace is being priced as if those collections will erode.
The model spread captures how wide the gap is. The relative P/E frame at a 12x sector multiple marks the stock near $191, the asset-based excess-return models land between $144 and $258, and the earnings-power value frame near $197. Inverting the price is even starker: at about 3x company-wide operating income, the market is paying below what even a 5% annual decline in operating profit would warrant. This is not a growth bet priced for perfection; it is a value name priced for deterioration that has not arrived. The current operating margin of 36.8% is roughly what the price implicitly assumes the business can hold, so a buyer is underwriting continuation, not improvement.
The operating engine behind the discount is strengthening, not weakening. Average receivable portfolios grew 14% to $4.4 billion, U.S. collections drove the record quarter, and management raised the 2026 collections target to $2.8 billion (up 8%) and guided full-year EPS to roughly $13, a 19% increase. The 10-Q describes the supplemental collections and portfolio data the business tracks (Q1 2026 10-Q, accession 0001084961-26-000009), and the company has been retiring shares, with the count down about 5% a year, so the per-share earnings power is rising on both higher profit and fewer shares. When a cheap stock is also buying itself back while earnings climb, the discount compounds in the holder's favor.
Bear Case
The right frame for a debt buyer is the cycle, and the bear case is that Encore is earning peak-looking profits off a supply tailwind that will not last. The business buys charged-off consumer receivables at a discount and collects more than it paid; its raw material is other people's defaults. Record collections and an 84% jump in net income are flattering precisely because the U.S. consumer-credit cycle has been generating abundant, attractively priced supply. When charge-off volumes normalize and competition for portfolios bids up purchase prices, the spread that produces a 36.8% operating margin compresses, and the earnings that look durable today reveal themselves as cyclical. The 10-Q already hints at the unevenness, noting that in its European markets default rates are generally low by historic levels and consumer lending volumes have stagnated (Q1 2026 10-Q, accession 0001084961-26-000009), which is the company telling you supply is not uniformly strong.
The balance sheet is the structural pressure point. Net debt sits near $3.8 billion against trailing operating income of about $681 million, a net-debt-to-operating-income ratio above 5x, and interest coverage is only about 2.3x. This is a heavily levered business by design, because buying portfolios requires funding, but leverage cuts both ways: rising rates raise the cost of the debt that funds the purchases, and the 10-Q warns that if new indebtedness is added to current levels the risks intensify and the company may not continue to satisfy its covenants (Q1 2026 10-Q, accession 0001084961-26-000009). A debt buyer that funds with debt is exposed at both ends of the rate cycle.
The accounting is genuinely hard to read, which is part of why the stock is cheap. Earnings depend on the company's own estimates of future recoveries on portfolios already bought; if those estimates prove optimistic, reported profit reverses through allowance charges. The free-cash-flow models in the X-ray break down here (they mark the stock near zero) because portfolio purchases, which are really the cost of goods, are treated as investing rather than operating, so headline cash flow understates the capital intensity. The high implied cost of capital in the valuation, near 18%, is the market's way of saying it does not fully trust the earning power. The deep discount is not free; it is compensation for cyclicality, leverage, and estimation risk.
Valuation
Encore screens as deeply cheap on almost every frame, and the question is whether the cheapness is opportunity or warning. The relative P/E model at a 12x sector multiple marks about $191, the simple excess-return model near $144, the two-stage excess-return model near $258, the earnings-power value frame near $197, and the residual-income model near $217. Against a $82.97 quote, the price sits well below all of them. The Graham number, a conservative floor, still lands near $116. The only models that mark near or below the price are the free-cash-flow capitalizations, and those are unreliable for a debt buyer because portfolio purchases (effectively the cost of inventory) are classified outside operating cash flow.
Inverting the price makes the discount concrete. At $82.97 the market pays about 3x company-wide operating income, a multiple so low that the price sits below what even a 5% annual operating-profit decline would warrant. Read this as a bound rather than a solved forecast: the market is not asking the business to grow, it is pricing in deterioration. The implied operating margin near 33.5% sits just below the current 36.8%, so the price embeds a slight erosion of profitability, not a collapse and not improvement.
The caveats temper the apparent bargain. The solve carries limited comparison data, so the label should be read directionally. More importantly, the business is levered (net debt above 5x operating income) and its earnings rest on estimates of future collections, which raises the genuine risk that today's profit is cyclically elevated. The honest summary: on reported numbers this is one of the cheaper names available, and the discount is the market demanding a high return for cyclicality, leverage, and the opacity of recovery accounting.
Catalysts
The most recent print was the first-quarter 2026 report, and it was strong enough to lift guidance. Diluted EPS doubled to $3.86 from $1.93, net income rose 84% to $86.2 million, revenue grew 21% to $475.4 million, and global collections set a record at $718.4 million, up nearly 19%, driven mainly by U.S. portfolios. Average receivable portfolios grew 14% to $4.4 billion, and global portfolio purchases were $363 million in the quarter.
Management raised the full-year outlook on the print: the 2026 collections target moved up to $2.8 billion (an 8% increase), full-year EPS is guided to roughly $13 (up 19%), and portfolio purchases are projected between $1.4 billion and $1.5 billion. The raised guidance is itself the near-term catalyst, and the next quarterly print is the test of whether collections momentum holds.
The forward thesis tracks two variables. The first is portfolio supply and pricing: the cleanest path to value is continued availability of charged-off receivables at attractive prices, which depends on the consumer-credit cycle. Watch U.S. charge-off trends and the prices Encore pays per portfolio, and note the company's observation that European default rates are low and lending volumes have stagnated, a softer supply signal there. The second is funding cost: as a levered buyer, Encore's profit is sensitive to interest expense, so watch the rate environment and the leverage ratio. A quarter that pairs continued collection strength with disciplined purchase pricing would support the value case; a quarter where purchase prices rise faster than collections, or funding costs climb, would validate the cyclical caution.
Sources: Encore Capital Q1 2026 results and 8-K (stocktitan.net, Globe and Mail); Encore Capital Q1 2026 earnings transcript (Motley Fool, AOL, Yahoo Finance); Q1 2026 10-Q (stocktitan.net).
Peer Cohorts (Per Segment, With Filing Citations)
Debt purchasing and recovery (reported)
- ENVA (Enova International, Inc.)
- FY2025 10-K: …financing repayment, while also providing excellent customer service. Our collections employees are trained to help the customer understand available payment alternatives and make arrangements to repay the loan or financing. We use a variety of collection strategies to satisfy a delinquent loan or finance receivable,…
- FY2025 10-K: …United States has historically been highest in the third and fourth quarters of each year, corresponding to the holiday season, and lowest in the first quarter of each year, corresponding to our customers' receipt of income tax refunds. Lower originations, particularly to new customers, which typically default at a…
- OMF (ONEMAIN HOLDINGS, INC.)
- FY2025 10-K: …estimates and a significant degree of management judgment: ALLOWANCE FOR FINANCE RECEIVABLE LOSSES - CONSUMER LOANS We estimate the expected credit losses on our finance receivables over their expected lives based on historical experience, current conditions, and reasonable and supportable forecasts of…
- FY2025 10-K: …and fees until charge-off when seven payments (approximately 180 days) become contractually past due, at which point we reverse finance charges and fees previously accrued. For certain finance receivables that had a carrying value that included a purchase premium or discount, we stop accreting the premium or discount…
- CACC (CREDIT ACCEPTANCE CORP)
- FY2025 10-K: …Loan") in exchange for the right to service the underlying Consumer Loans. Under the Purchase Program, we buy the Consumer Loans from the Dealers (referred to as a "Purchased Loan") and keep all amounts collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as "Loans." The…
- FY2025 10-K: …Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under the Portfolio Program, less the related Dealer Holdback payments that we expected to make. The Purchased Loans amount represents repayments that we expected to collect at the time of assignment on…
- BFH (Bread Financial Holdings, Inc.)
- FY2025 10-K: …consumer debt. A recession or prolonged period of economic weakness would likely, among other things, adversely affect consumer discretionary spending levels and the ability and willingness of customers to pay amounts owed to us and could have a material adverse effect on our business, key credit trends, results of…
- FY2025 10-K: …84 % and 16 % of these loans were originated with customers with Vantage scores of 661 or above, and below 661, respectively. Modified Credit Card Loans Consumer Relief Programs As part of our collections strategy, we may offer temporary and short term programs in order to improve the likelihood of collections and…
- SLM (SLM Corp)
- FY2025 10-K: -offs as a percentage of average loans in repayment and delinquencies as a percentage of loans in repayment. Operating Expenses The cost of operating our business directly affects our profitability. We strive to manage growth in our business in a prudent fashion by focusing on investments to improve efficiency and…
- FY2025 10-K: …in the fourth quarter of 2024, our allowance for credit losses for FFELP Loans and related periodic provision expense was small because we generally bore a maximum of three percent loss exposure due to the federal guarantee on such loans. We maintained an allowance for credit losses for our FFELP Loans at a level…
- NNI (NELNET, INC.)
- FY2025 10-K: 6 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Purchased Loans Receivable with Credit Deterioration (PCD) The Company has purchased loans that have experienced more than insignificant credit deterioration since…
- FY2025 10-K: …Liabilities The Company accounts for loan sales and debt repurchases in accordance with applicable accounting guidance. If a transfer of loans qualifies as a sale, the Company derecognizes the loan and recognizes a gain or loss as the difference between the carrying basis of the loan sold and the consideration…
- LC (LendingClub Corporation)
- FY2025 10-K: …securitizations. In connection with these securitizations, as well as other Structured Program transactions, we make customary representations, warranties and covenants. If there is a breach of those representations, warranties and covenants that materially and adversely affects the subject loans, then we will be…
- FY2025 10-K: …• difficulty in separating assets and replacing shared services; • assumption of exposure to performance of any acquired loan portfolios; • potential disruptions to our ongoing businesses; and • unexpected costs and unknown risks and liabilities associated with the acquisition. Accordingly, any acquisition,…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.