RCII

Rent-a-Center Inc.

Consumer


Presented:09/11/2019
Price:$25.84
Cap:$1.40B
Current Price:$29.88
Cap:$1.63B

Presented

Date09/11/2019
Price$25.84
Market Cap$1.40B
Ent Value$1.94B
P/E Ratio12.3x
Book Value$7.23
Div Yield0%
Shares O/S54.27M
Ave Daily Vol943,427
Short Int13.43%

Current

Price$29.88
Market Cap$1.63B
Rent-A-Center, Inc. engages in the provision of furniture, electronics, appliances, computers, and smartphones through flexible rental purchase agreements that allow the customer to obtain ownership of the merchandise at the conclusion of an agreed upon rental period. It operates through the following segments: Core U.S., Acceptance Now, Mexico, and Franchising. The Core U.S. segment consists of company-owned rent-to-own stores in the United States, Canada and Puerto Rico. The Acceptance Now segment offers an on-site rent-to-own option at a third-party retailer's location. The Mexico segment consists of its company-owned rent-to-own stores in Mexico. The Franchising segment use Rent-A-Center's, ColorTyme's, and RimTyme's trade names, service marks, trademarks and logos, and operate under distinctive operating procedures and standards. The company was founded by Mark E. Speese on September 16, 1986 and is headquartered in Plano, TX.

Publicly traded companies mentioned herein: Rent-A-Center Inc/TX (RCII)

Highlights

The presenter is short shares of Rent-A-Center Inc (RCII), the furniture and electronics rent-to-own company. Following years of disarray, activist involvement has led to the stock rising ~160% over the past two years to the current ~$26 per share. The presenter attributes half of this appreciation (~80%) to an aggressive debt paydown and the other half to earnings growth. At this point, he feels the activist strategy has run its course and that RCII has reached peak earnings; meanwhile, he believes RCII’s deteriorating earnings quality and fundamentals are underestimated, and therefore views the company as overvalued (~6x EBITDA, ~12x earnings) relative to similar store-closing brick and mortar retailers and account-losing consumer finance businesses. Over the next 3 – 5 years, the presenter sees downside to $8 – $10 per share as earnings fall 20% due to a difficult, expensive path forward. 

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Idea Discussion

Commentor 1 - 2 weeks ago

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