Consensus On Curo Leans Positive As Sell-Side Launches Coverage

With the IPO quiet period for consumer finance company Curo Group Holdings Corp CURO expiring, sell-side analysts initiated coverage on the company Tuesday. 

The Analysts

Credit Suisse analyst Moshe Orenbuch initiated coverage of Curo with an Outperform rating and $21 price target.

William Blair analyst Robert Napoli initiated coverage of the shares of the company with an Outperform.

Credit Suisse: Strong Profit Opportunity 

"Curo has a strong opportunity to grow profitably in the nonprime lending space," Credit Suisse analyst Orenbuch said in a note. (See the analyst's track record here.) 

Curo is well-equipped to leverage its leading online presence and industry-leading productivity in its stores, Orenbuch said. 

As the company shifts away from a single-pay product, it could see an increase in repeat customers as well as product innovation to higher-quality customers, the analyst said. Credit Suisse expects Curo's charge-off rate to decline "modestly."

Credit Suisse expects top-line growth to improve Curo's already above-peer margins, with a mid-to-high-20s EBITDA margin achievable by the end of 2019.

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William Blair: Substantial Growth Potential

William Blair's Napoli said Curo is well-positioned to deliver meaningful revenue and earnings growth over the next several years, helped by further market penetration, "leveraging its scalable and versatile proprietary underwriting and technology platform" and its omnichannel customer acquisition model. (See Napoli's track record here.) 

Curo is addressing the void in the non-prime consumer segment created from the reduction of credit availability from traditional sources following the Great Recession, Napoli said. The analyst estimates a roughly 6-percent potential market share for Curo in underpenetrated, underbanked U.S. households.

William Blair expects Curo's revenue growth to be sustainable in the low-to-mid teens over the medium term and margins to expand 100-200 basis points per year due to the company's highly scalable platform. Historically, Curo has produced strong cash flows, Napoli said. 

William Blair estimates earnings per share of $2.31 in 2018; $2.94 in 2019; and $3.82 in 2020, translating to growth of 24 percent in 2018, 27 percent in 2019 and 30 percent in 2020.

The Price Action

Curo offered 6.7 million shares in an IPO late last year at $14 each. The stock clocked a gain of 1.4 percent on its Dec. 7 debut session. Since then, it has traded in a tight range.

Curo closed down slightly Friday at $14.05. 

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