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Here's Why Rent-A-Center Stock Remains an Investor Favorite
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Rent-A-Center, Inc. remains an investor favorite thanks to sturdy performance in the first half of 2020 and an upbeat outlook for the year, aided by its robust endeavors. An impressive e-commerce business coupled with a resilient business model and gains from a pullback in traditional lending have been driving the company’s performance. Continued immense strength in its Preferred Lease wing further remains a catalyst.
Impressively, the Plano, TX-based company has seen its shares surge as much as 36.9% in the past three months, crushing its broader Consumer Discretionary sector and the S&P 500 Index’s respective growth of 20.6% and 16.5%. Meanwhile, the industry has rallied 25.2%. The VGM Score of A further speaks of this Zacks Rank #1 (Strong Buy) stock’s inherent potentials. You can see the complete list of today’s Zacks #1 Rank stocks here.
Diving Deep
Rent-A-Center continues to make investments toward enhancing its omni-channel platform to offer customers a seamless experience across channels, products and brands. Apparently, e-commerce revenues surged 60% in the second quarter of 2020 and accounted for nearly 19% of the overall Rent-A-Center business revenues. Management anticipates e-commerce business to account for more than 25% of the company’s revenues by this year. Meanwhile, the company’s Acceptance Now business model, which is part of the Preferred Lease segment, has been seeing momentum.
Revenues at Preferred Lease grew 8.4% in the most-recent quarter, following an increase of 10% in the first quarter. The segment constituted about 29.4% of the company’s consolidated revenues in the first half of 2020. Solid invoice volumes, implementation of the Preferred Lease virtual solution and gains from the Merchants Preferred buyout are fueling the division’s growth. Notably, the Preferred Lease portfolio is anticipated to grow over 15% by the end of 2020, and invoice volume is estimated to be up about 25% year over year. Revenues at Preferred Lease are likely to improve 10-12% each quarter in the second half. Moreover, the unit’s adjusted EBITDA for 2020 is projected to increase about 11% year over year, with the margin likely to grow 10% of revenues in the back half.
Buoyed by a sturdy first-half 2020 performance, management raised free cash flow projection and reaffirmed sales and earnings view for 2020 that was originally issued on Feb 24. Revenues are projected in the band of $2.755-$2.875 billion, indicating growth of about 3-8% from 2019’s reported tally. Moreover, adjusted EBITDA is anticipated between $255 million and $285 million, compared with $254.2 million in 2019. It now projects free cash flow in the range of $135-$165 million, up from the earlier-guided range of $105-$135 million. Further, adjusted earnings per share are envisioned to be between $2.45 and $2.85, suggesting growth of 9-27% from $2.24 earned in 2019. The Zacks Consensus Estimate currently stands at $2.60, increasing 14.5% over the past seven days.
Bottom Line
These apart, Rent-A-Center looks well placed on the dividend-payout front. Impressively, management raised quarterly dividend from 25 cents to 29 cents during the first quarter of 2020. Notably, the company’s current annualized dividend rate of $1.16 per share reflects a substantial increase from the year-ago period. It has a dividend payout of 46%, dividend yield of 3.6% and free cash flow yield of 17.5%. With an annual free cash flow return on investment of 31%, ahead of that of the industry’s 13.1%, the dividend payment is likely to be sustainable.
Wrapping it up, Rent-A-Center’s continuous expansion of technology, strength in its business model and focus on innovation poise it well for growth in future.
More Solid Consumer Discretionary Bets
Cimpress (CMPR - Free Report) has a long-term earnings growth rate of 20% and sports a Zacks Rank #1.
Crocs (CROX - Free Report) , also a Zacks Rank #1 stock with a long-term earnings growth rate of 15%.
Hanesbrands (HBI - Free Report) has a long-term earnings growth rate of 5% and a Zacks Rank #1.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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Here's Why Rent-A-Center Stock Remains an Investor Favorite
Rent-A-Center, Inc. remains an investor favorite thanks to sturdy performance in the first half of 2020 and an upbeat outlook for the year, aided by its robust endeavors. An impressive e-commerce business coupled with a resilient business model and gains from a pullback in traditional lending have been driving the company’s performance. Continued immense strength in its Preferred Lease wing further remains a catalyst.
Impressively, the Plano, TX-based company has seen its shares surge as much as 36.9% in the past three months, crushing its broader Consumer Discretionary sector and the S&P 500 Index’s respective growth of 20.6% and 16.5%. Meanwhile, the industry has rallied 25.2%. The VGM Score of A further speaks of this Zacks Rank #1 (Strong Buy) stock’s inherent potentials. You can see the complete list of today’s Zacks #1 Rank stocks here.
Diving Deep
Rent-A-Center continues to make investments toward enhancing its omni-channel platform to offer customers a seamless experience across channels, products and brands. Apparently, e-commerce revenues surged 60% in the second quarter of 2020 and accounted for nearly 19% of the overall Rent-A-Center business revenues. Management anticipates e-commerce business to account for more than 25% of the company’s revenues by this year. Meanwhile, the company’s Acceptance Now business model, which is part of the Preferred Lease segment, has been seeing momentum.
Revenues at Preferred Lease grew 8.4% in the most-recent quarter, following an increase of 10% in the first quarter. The segment constituted about 29.4% of the company’s consolidated revenues in the first half of 2020. Solid invoice volumes, implementation of the Preferred Lease virtual solution and gains from the Merchants Preferred buyout are fueling the division’s growth. Notably, the Preferred Lease portfolio is anticipated to grow over 15% by the end of 2020, and invoice volume is estimated to be up about 25% year over year. Revenues at Preferred Lease are likely to improve 10-12% each quarter in the second half. Moreover, the unit’s adjusted EBITDA for 2020 is projected to increase about 11% year over year, with the margin likely to grow 10% of revenues in the back half.
Buoyed by a sturdy first-half 2020 performance, management raised free cash flow projection and reaffirmed sales and earnings view for 2020 that was originally issued on Feb 24. Revenues are projected in the band of $2.755-$2.875 billion, indicating growth of about 3-8% from 2019’s reported tally. Moreover, adjusted EBITDA is anticipated between $255 million and $285 million, compared with $254.2 million in 2019. It now projects free cash flow in the range of $135-$165 million, up from the earlier-guided range of $105-$135 million. Further, adjusted earnings per share are envisioned to be between $2.45 and $2.85, suggesting growth of 9-27% from $2.24 earned in 2019. The Zacks Consensus Estimate currently stands at $2.60, increasing 14.5% over the past seven days.
Bottom Line
These apart, Rent-A-Center looks well placed on the dividend-payout front. Impressively, management raised quarterly dividend from 25 cents to 29 cents during the first quarter of 2020. Notably, the company’s current annualized dividend rate of $1.16 per share reflects a substantial increase from the year-ago period. It has a dividend payout of 46%, dividend yield of 3.6% and free cash flow yield of 17.5%. With an annual free cash flow return on investment of 31%, ahead of that of the industry’s 13.1%, the dividend payment is likely to be sustainable.
Wrapping it up, Rent-A-Center’s continuous expansion of technology, strength in its business model and focus on innovation poise it well for growth in future.
More Solid Consumer Discretionary Bets
Cimpress (CMPR - Free Report) has a long-term earnings growth rate of 20% and sports a Zacks Rank #1.
Crocs (CROX - Free Report) , also a Zacks Rank #1 stock with a long-term earnings growth rate of 15%.
Hanesbrands (HBI - Free Report) has a long-term earnings growth rate of 5% and a Zacks Rank #1.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>