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Encore Capital Group Inc (ECPG)
NASDAQ:ECPG
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Encore Capital
(NASDAQ:ECPG)
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Rating:68Neutral
Price Target:
$78.00
▲(8.54% Upside)
Action:ReiteratedDate:02/26/26
The score is driven primarily by improved financial momentum (profitability and positive free cash flow) and a strong, guidance-supported earnings call outlook. Technicals also support the view with a clear uptrend and positive momentum. The main offset is weaker valuation support due to a negative P/E and no dividend yield data.
Positive Factors
Strong cash generation & collections
Record collections and a 20% increase demonstrate durable cash conversion that supports portfolio reinvestment, deleveraging and discretionary capital returns. Higher recurring cash inflows improve visibility for future recoveries and reduce reliance on external short-term funding across the next several quarters.
Improved leverage and balance-sheet flexibility
Leverage moving into the 2–3x target range while accessing capital markets indicates stronger financial flexibility and a lower near-term refinancing burden. Sustained, within-target leverage supports disciplined portfolio buying, potential buybacks, and resilience to rate moves over the medium term.
Larger receivables base and ERC growth
A 14% increase in ERC and a larger average receivable base provide multi-period visibility into cash flows and underpin future revenue. Higher ERC supports disciplined purchasing and planning, reducing short-term earnings volatility and improving the predictability of cash efficiency and returns.
Negative Factors
Earnings quality & volatility
The disconnect where EBITDA is negative while EBIT and net income are positive signals unusual accounting or one-time items that complicate earnings interpretation. Historical swings and prior losses undermine predictability, making cash-flow and covenant forecasting harder for lenders and investors over the medium term.
Rising interest expense
Higher financing costs directly compress net margins and free cash flow; because the business funds portfolio purchases, rising interest expense reduces return on invested capital and increases sensitivity to rate cycles. Continued margin pressure could limit reinvestment or capital-return flexibility.
Concentration on U.S. market & regional headwinds
Heavy reliance on U.S. portfolio supply and favorable consumer credit trends concentrates revenue and deployment risk. With Cabot facing U.K. headwinds and management deprioritizing M&A, geographic concentration raises the chance that a U.S. cycle reversal or local market softness meaningfully curtails purchases, yields and collections.
Encore Capital (ECPG) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.58B
Dividend YieldN/A
Average Volume (3M)205.45K
Price to Earnings (P/E)4.9
Beta (1Y)0.82
Revenue Growth10.85%
EPS Growth77.59%
CountryUS
Employees7,350
SectorFinancial
Sector Strength70
IndustryFinancial - Mortgages
Share Statistics
EPS (TTM)3.37
Shares Outstanding21,410,273
10 Day Avg. Volume304,941
30 Day Avg. Volume205,454
Financial Highlights & Ratios
PEG Ratio-0.02
Price to Book (P/B)1.29
Price to Sales (P/S)0.72
P/FCF Ratio9.95
Enterprise Value/Market Cap3.56
Enterprise Value/Revenue3.18
Enterprise Value/Gross Profit4.29
Enterprise Value/Ebitda8.64
Forecast
1Y Price Target
$82.67Price Target Upside15.04% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering3
EPS Forecast (FY)8.99
Revenue Forecast (FY)$1.76B
Encore Capital Business Overview & Revenue Model
Company DescriptionEncore Capital Group, Inc., a specialty finance company, provides debt recovery solutions and other related services for consumers across 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 provision of early stage collection, business process outsourcing, and contingent collection services, as well as debt servicing and other portfolio management services to credit originator for non-performing loans. The company was incorporated in 1999 and is headquartered in San Diego, California.
How the Company Makes MoneyEncore Capital generates revenue primarily through the acquisition and collection of distressed consumer debt. The company purchases portfolios of charged-off debt at a discount, allowing it to collect payments above the acquisition cost, which constitutes its main revenue stream. Additionally, Encore earns money through fees associated with debt collection services and may receive interest on payment plans established with consumers. The company also leverages data analytics to optimize its collections strategies, improving recovery rates and overall profitability. Key partnerships with credit agencies and financial institutions further enhance its ability to source portfolios, contributing to its earnings potential.
Encore Capital Earnings Call Summary
Earnings Call Date:Feb 25, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 06, 2026
Earnings Call Sentiment Positive
Overall the call conveys a strong, positive performance and outlook driven by record portfolio purchases, record collections, improved yields and improved returns and leverage. Management provided explicit forward guidance and emphasized operational and technological improvements that are driving higher collections and margins. Noted risks include higher interest expense, elevated operating and legal spending as purchases grow, headwinds and heightened competition in Cabot's U.K. market, and dependence on continued favorable U.S. market conditions. On balance, positive operational momentum, record cash generation, deleveraging and confident guidance outweigh the listed challenges.Q4-2025 Updates
Positive Updates
Record Portfolio Purchases and U.S. Focus
Global portfolio purchases reached a record $1.4 billion in 2025, up 4% year-over-year, with 83% of purchases spent in the U.S.; MCM finished the year with a record $1.17 billion of U.S. portfolio purchases, up 18% YOY ($175 million increase).
Record Collections and Strong Cash Generation
Global collections rose 20% to a record $2.6 billion in 2025; cash generation increased 22% year-over-year, and global collections represented 109% of prior-year ERC, demonstrating exceptional cash conversion.
Improved Receivables and ERC
Average receivable portfolios increased 12% to $4.1 billion and estimated remaining collections (ERC) rose 14% to a record $9.7 billion, signaling stronger future cash flow visibility.
Outstanding U.S. Operational Performance
MCM collections were a record $1.95 billion, up 24% YOY; Q4 MCM collections were $503 million—the highest U.S. quarterly collections on record—driven by new technologies, digital capabilities and operational innovation.
Revenue, Yield and Recoveries Strength
Portfolio revenue increased 12% to $1.46 billion with a portfolio yield of 35.7%; collection yield improved 3.9 percentage points to 63.6%; changes in recoveries totaled $209 million for 2025 (with $198 million being recoveries above forecast/cashovers).
Debt Purchasing Revenue and Net Purchasing Yield
Debt purchasing revenue rose 37% to $1.66 billion in 2025, producing a net purchasing yield of 40.8% (with approximately 5.1 percentage points attributable to changes in recoveries).
Margin and Return Improvements
Cash efficiency margin improved by 3.2 percentage points to 57.8% in 2025 (company expects >58% in 2026); return on invested capital (ROIC) improved to 13.7% in 2025 from 7.5% the prior year.
Balance Sheet Strength and Capital Actions
Leverage improved to 2.4x from 2.6x a year ago; issued $500 million senior secured notes at a 6.625% coupon and repaid EUR100 million of floating-rate notes; repurchased ~9% of outstanding shares in 2025 for approximately $90 million.
Solid European Performance (Cabot)
Cabot collections were $641 million in 2025, up 9% YOY; Cabot purchases were $234 million, consistent with historical trends (below 2024 due to exceptional Q4'24 spot purchases).
Forward Guidance and Visibility
Management provided explicit 2026 guidance: global portfolio purchases $1.4–$1.5 billion, global collections +5% to $2.7 billion, EPS +10% to $12, interest expense and other income ~ $300 million, and an effective tax rate in the mid-20s.
Negative Updates
Cabot Market Headwinds and Lower Deployments vs. 2024
Cabot purchases in 2025 ($234 million) were lower than 2024 primarily because Q4 2024 included an outsized $200 million of spot purchases; the U.K. remains impacted by subdued consumer lending, low delinquencies and robust competition, limiting attractive deployment opportunities.
Rising Interest Expense
Interest expense and other income increased 15% to $291 million in 2025, driven by higher debt balances, which elevates fixed funding costs even as leverage improved.
Operating Expense Dynamics and One-Time Items
Reported operating expenses decreased 1% but, when adjusted for one-time items, operating expenses were up 11% in 2025—indicating higher absolute operating spend even as collections grew faster (20%), and creating sensitivity to cost control if collections slow.
Potential Short-Term Legal Cost Pressure
Management expects some increase in legal expenses as purchasing grows (more accounts entering collection legal channels), even though the percent of legal collections for MCM is at an all-time low (~34–35%).
Uncertainty on Share Repurchase Pace
Company repurchased ~9% of shares in 2025 (~$90 million) but provided no firm repurchase plan for 2026; management tied future repurchase pace to leverage, liquidity and market outlook, leaving some execution uncertainty for capital return expectations.
Dependence on Favorable U.S. Market Conditions
A substantial portion of growth and guidance depends on the favorable U.S. environment (record revolving balances, elevated charge-off rates and robust portfolio supply); a reversal in consumer payment behavior or credit conditions could dampen purchases, yields and collections.
Limited M&A Priority
M&A is de-emphasized (not listed among top near-term capital priorities), which reduces optionality for inorganic growth—management indicated a high bar for M&A and prioritized portfolio purchases, potentially limiting strategic flexibility if attractive acquisitions emerge.
Company Guidance
Encore's 2026 guidance calls for global portfolio purchases of $1.4–$1.5 billion, global collections rising about 5% to $2.7 billion and EPS increasing ~10% to $12 (from $10.91 in 2025), with interest expense and other income around $300 million and an effective tax rate in the mid‑20s; the company also expects cash efficiency margin to exceed 58% and to operate within its target leverage range of 2–3x (ended 2025 at 2.4x). Management cited the 2025 operating base that underpins the outlook — portfolio purchases $1.4B, average receivable portfolios $4.1B, ERC $9.7B, collections $2.6B (MCM $1.95B; Cabot $641M), ROIC 13.7% — and noted it repurchased roughly 9% of shares (~$90M) in 2025 while not providing a specific buyback amount for 2026.Encore Capital Financial Statement Overview
Summary
2025 results show a clear rebound with strong profitability (net income $257M, ~14.5% margin), solid revenue growth (+13.3%), and continued positive free cash flow ($127M). Offsetting this are historically volatile results (losses in 2023–2024), prior periods of high leverage, and an unusual 2025 quality-of-earnings signal (negative EBITDA despite positive EBIT/net income).Income Statement
Profitability rebounded strongly in 2025 with net income of $257M and a solid ~14.5% net margin, alongside a sharp improvement in gross margin (~74%) and healthy revenue growth (+13.3%). However, results have been volatile over the period: losses in 2023–2024 followed profitable years in 2020–2022, and 2025 shows an unusual disconnect where EBITDA is negative despite positive EBIT and net income, which raises quality/consistency questions around earnings composition.63
Positive
Balance Sheet
The balance sheet shows a meaningful improvement in reported leverage in 2025, with total debt shown as $0 and debt-to-equity at 0.0x, alongside higher equity ($977M) and strong return on equity (~26%). That said, prior years carried heavy leverage (debt-to-equity ~2.5x–4.8x in 2020–2024) and returns swung from positive to deeply negative during loss years, highlighting historically elevated financial risk and sensitivity to operating conditions.55
Neutral
Cash Flow
Cash generation appears steady: operating cash flow has been consistently positive (~$153M–$313M across 2020–2025) and 2025 free cash flow remained positive at $127M. Free cash flow broadly tracks earnings in recent profitable years (2025 free cash flow is ~83% of net income), but growth has been uneven (free cash flow growth slightly negative in 2025 and down sharply in some earlier years), indicating variability in cash conversion and reinvestment/working-capital dynamics.67
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.76B | 1.32B | 1.22B | 1.40B | 1.61B |
| Gross Profit | 1.22B | 603.56M | 571.24M | 769.70M | 927.98M |
| EBITDA | 652.54M | 174.00M | 63.35M | 510.72M | 656.27M |
| Net Income | 256.83M | -139.24M | -206.49M | 194.56M | 350.78M |
Balance Sheet | |||||
| Total Assets | 5.34B | 4.79B | 4.63B | 4.51B | 4.61B |
| Cash, Cash Equivalents and Short-Term Investments | 156.78M | 199.87M | 158.36M | 143.91M | 189.65M |
| Total Debt | 4.13B | 3.67B | 3.32B | 2.90B | 3.00B |
| Total Liabilities | 4.36B | 4.02B | 3.69B | 3.33B | 3.42B |
| Stockholders Equity | 976.75M | 767.33M | 936.54M | 1.18B | 1.19B |
Cash Flow | |||||
| Free Cash Flow | 126.93M | 127.16M | 101.28M | 134.12M | 269.68M |
| Operating Cash Flow | 153.20M | 156.17M | 152.99M | 210.68M | 303.05M |
| Investing Cash Flow | -242.59M | -440.43M | -401.94M | -130.24M | 339.90M |
| Financing Cash Flow | 44.85M | 317.77M | 268.30M | -107.44M | -655.69M |
Encore Capital Technical Analysis
Positive
71.86
Price Trends
57.18
Positive
52.44
Positive
46.40
Positive
Market Momentum
3.22
Negative
84.39
Negative
94.40
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ECPG, the sentiment is Positive. The current price of 71.86 is above the 20-day moving average (MA) of 59.73, above the 50-day MA of 57.18, and above the 200-day MA of 46.40, indicating a bullish trend. The MACD of 3.22 indicates Negative momentum. The RSI at 84.39 is Negative, neither overbought nor oversold. The STOCH value of 94.40 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ECPG.
Encore Capital Risk Analysis
Encore Capital disclosed 38 risk factors in its most recent earnings report. Encore Capital reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Encore Capital Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
68 Neutral | $1.58B | 4.92 | 29.45% | ― | 10.85% | 77.59% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
58 Neutral | $4.68B | 16.04 | 12.55% | 0.90% | 25.42% | 190.85% | |
50 Neutral | $1.71B | 35.14 | 3.15% | 4.42% | 12.08% | 20.13% | |
47 Neutral | $619.82M | -32.50 | -25.72% | ― | 3.91% | 27.78% |
* Financial Sector Average
ECPG
Encore Capital
71.86
37.40
108.53%
WD
Walker & Dunlop
48.70
-33.10
-40.47%
PFSI
PennyMac Financial
89.76
-11.89
-11.70%
LDI
loanDepot
1.86
0.13
7.51%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.