Atlanticus Holdings has been on fire lately. In the past six months alone, the company’s stock price has rocketed 43.1%, reaching $76.39 per share. This run-up might have investors contemplating their next move.
Is now the time to buy Atlanticus Holdings, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Atlanticus Holdings Not Exciting?
We’re glad investors have benefited from the price increase, but we're sitting this one out for now. Here are two reasons we avoid ATLC and a stock we'd rather own.
1. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Atlanticus Holdings’s full-year EPS dropped 13.1%, or 3.1% annually, over the last four years. We’ll keep a close eye on the company as diminishing earnings could imply changing secular trends and preferences.
2. High Debt Levels Increase Risk
Atlanticus Holdings reported $804.1 million of cash and $7.05 billion of debt on its balance sheet in the most recent quarter.
As investors in high-quality companies, we primarily focus on whether a company’s profits can support its debt.
With $198.1 million of EBITDA over the last 12 months, we view Atlanticus Holdings’s 31.5× net-debt-to-EBITDA ratio as inadequate. The company’s lacking profits relative to its borrowings give it little breathing room, raising red flags.
Final Judgment
Atlanticus Holdings’s business quality ultimately falls short of our standards. Following the recent surge, the stock trades at 7.5× forward P/E (or $76.39 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.
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