What a fantastic six months it’s been for Encore Capital Group. Shares of the company have skyrocketed 51.2%, hitting $56.60. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Encore Capital Group, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Encore Capital Group Not Exciting?
Despite the momentum, we're swiping left on Encore Capital Group for now. Here are three reasons there are better opportunities than ECPG and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.
Over the last five years, Encore Capital Group grew its revenue at a weak 1.3% compounded annual growth rate. This fell short of our benchmarks.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Encore Capital Group, its EPS declined by 15.9% annually over the last five years while its revenue grew by 1.3%. This tells us the company became less profitable on a per-share basis as it expanded.
3. High Debt Levels Increase Risk
Encore Capital Group reported $172.5 million of cash and $3.93 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 $349.9 million of EBITDA over the last 12 months, we view Encore Capital Group’s 10.8× 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
Encore Capital Group isn’t a terrible business, but it doesn’t pass our quality test. After the recent rally, the stock trades at 7.6× forward P/E (or $56.60 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.
Stocks We Like More Than Encore Capital Group
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
