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PROG Holdings Is A Profitable, High-Growth Fintech Trading At A No-Growth Multiple

Apr. 02, 2021 9:32 AM ETPROG Holdings, Inc. (PRG)AAN, UPBD11 Comments


  • A high-growth business previously masked by a stagnant, legacy business is now independent and publicly traded.
  • Virtual lease-to-own is closer to being a fintech than traditional lease-to-own retailers.
  • Growth potential is completely free at 12.5x forward earnings.
  • Management is prioritizing share repurchases over dividends.

Lease Agreement
Photo by teekid/E+ via Getty Images

"This article was amended on 4/27/2021 to reflect new clarifying remarks."

Investment Thesis

Prog Holdings (NYSE: PRG) is the leading virtual lease-to-own provider in the U.S with large national retail partners such

This article was written by

Personal philosophy most influenced by Buffett, then Damadoran, then Greenblatt, then Mauboussin, then the microcap community, and most recently Sleep. Still discovering outstanding emerging managers with well written fund letters / research.

Analyst’s Disclosure: I am/we are long PRG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (11)

Off His Game profile picture
Found this stock recently when going through my screeners. I find it very interesting. Goeasy is a big winner on the Canadian market as a subprime lender that has moved more and more towards ecommerce (They owned a large piece of Paybright which was bought by Affirm).

Seems quite undervalued and the recent pullback makes it very interesting.
Narratives & Numbers profile picture
@Off His Game Didn't know about Goeasy, thanks for mentioning!
Off His Game profile picture
@Narratives & Numbers Incredible run and continues to be very strong. No serious competition in a fragmented space in Canada. Pays a nice 2% dividend too thats growing quickly
Zetetic always profile picture
Sorry for not mentioning orinally, thank for the article @Narratives & Numbers.

Wouldn't it be awesome if PRG dropped to $20/sh? I invested in RCII about 20% of my capital when it was $8/sh. I sold at $16 about 1.5 years later and missed the entire upside to where it is now. RCII isn't worth what it is selling for now. PRG is cheapish, meaning not expensive. I hope it gets cheaper because it is the future in this space and I would like to acquire some of it. A company with a great future, but only an ok price.

I don't mind purchasing a great company with an ok price if they have a track record to show what could happen over a longer holding period. This is the rub; not PRG's fault, just the trading history. And, I believe that some hiccups are coming their way.
TurnOverRocks profile picture
Thanks for write up. But I would favor RCII following its acquisition of Acima, which has industry-leading margins and growing far faster (doubling profits each year). Yet, RCII trades for < 10x 2021 FCF guide. RCII also has better leadership w/CEO quadrupling EBItDA since rejoining 3 years ago.
@TurnOverRocks Kinda funny. PRG/AAN breaks up and RCII does the exact opposite in the same time frame. A bit of "been there, done that." A fruitful exercise might be to examine 'why?' and 'who knows what?' of both companies. Good luck.
Good job. You got the essence of the opportunity. Now my second largest holding.
@Spinoffdude Most analysts use P/E ratios (I don't) for valuation. It is a short-cut method but I use it now to illustrate how ridiculous the current price is for PRG. It is followed by 9 analysts who believe it is growing 10-12% a year; the low estimate for EPS this year is $3.43 which means they are valuing a 10%+ growth company at a P/E ratio of 12.8. Something is seriously wrong and I believe it is the current price.
Off His Game profile picture
@Spinoffdude time will tell but it seems like its due for a strong 2021
Bought AAN at $25 pre-spin and just sold the spin (though cheap, a bit too boring for me) and kept PRG for trading at like 1/4-1/5 its peers in similar businesses, not to mention comp to any BNPL. Looking forward to $150+ in 2-3 years :)
I bought RCII and happy with that decision.
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