Consumer Portfolio Services, In (NASDAQ:CPSS)

On November 12, 2012 we added CPSS to the GeoBargain list @ $3.68

Catalyst: Bullish second quarter 2012 conference call.  The company commented that investors should reference 2004 through 2007 for a barometer on how it can grow its business.  During 2004 to 2007 revenues grew from $132.7 million to $394.6 million, while 2007 EPS reached a high of $1.06 on a pretax basis ($0.61 after tax).

We are now removing CPSS from the GeoBargain List @ $6.67

Current road block: The stock has exceeded our price targets and is up 81% since first being coded a GeoBargain. We will continue to track the stock and reevaluate the story after the fourth quarter 2012 results are released.

• Peak performance: Reached a high of  $6.82 on 01/09/2013 for a maiximum potential return of 85%
• Current Price: $6.67

In our 8/17/2012 email to premium members we mentioned that we started tracking and bought shares in CPSS.  At the time of this email, CPSS was trading at $2.80.  Here is the note from our blog that our members were directed too:

This company operates in what most people would consider a mundane industry. The company provides indirect financing to dealer customers for borrowers with limited credit histories, low incomes or past credit problems ("sub-prime customers").  They serve as an alternative source of financing for dealers, allowing sales to customers who otherwise might not be able to obtain financing. Obviously, this business took a severe hit upon the onset of the 2008 great recession. After posting a track record of consistent profitability and increasing revenues, the company lost money in every quarter from 2009 through the 3rd quarter of 2011 on declining revenues. In mid 1997 the stock price reached a high of $17.63. The company reported EPS of $1.17 in 1997 and in 1996 the company’s EPS came in at $0.93.  On 5/9/2006 the stock reached a high of $8.36.  The company reported EPS of $0.55 in 2006 and in 2005 EPS was $0.14. There are 5 reasons we will track this company: 1- The company has now logged 3 straight quarters of revenue growth and profitability. 2- In its 2012 2nd quarter conference call the company commented that its EPS of $0.05 reported in the quarter should be the norm for the rest of 2012. However, more importantly,  the company commented that investors should reference 2004 through 2007 for a gauge on how it can grow EPS. During this period pre-taxed EPS grew from a loss of $0.75 to a profit of $0.61.  The company did not mention this information in its 2012 2nd quarter press release, potentially providing investors with an opportunity to take advantage of this information arbitrage. 3- The company is serving a market that is being ignored by traditional lending institutions. 4- Due to the great recession the number of sub-prime borrowers has likely increased. 5- The company may soon generate a new revenue stream by dealing directly with potential customers.

CPSS was also mentioned in 3 more emails, including a October 16, 2012 premium email talking about the strong third quarter 2012 earnings they reported.  The stock hit a new high of $4.73 which is a 75% increase from the price of our original mention.

To be among the first to receive alerts like this, subscribe to our premium service!

Third Quarter 2012 Results

• Revenues for the third quarter of 2012 were $47.9 million, an increase of approximately $14.1 million, or 42%, compared to $33.8 million for the third quarter of 2011.
• Earnings of $2.7 million, or $0.11 per diluted share, for its third quarter ended September 30, 2012 compared to a net loss of $4.0 million, or $0.20 per diluted share, in the third quarter of 2011.

We are extremely pleased with our third quarter financial results," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer. "It was our first quarter of organic sequential revenue growth since 2007 and the onset of the financial crisis. This demonstrates that we are well positioned within the auto finance industry to continue growing our managed portfolio. And as we fund this growth with cost-efficient securitizations, our net interest margin is expanding significantly. These two components have been big drivers of our earnings growth over the last year."

IRVINE, Calif., Sept. 19, 2012 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq:CPSS) ("CPS" or the "Company") today announced the closing of its third term securitization in 2012. The transaction is CPS's sixth senior subordinate securitization since 2011.

In the transaction, qualified institutional buyers purchased $147,000,000 of asset-backed notes secured by automobile receivables purchased by CPS. The sold notes, issued by CPS Auto Receivables Trust 2012-C, consist of five classes. Ratings of the notes were provided by Standard & Poor's and Moody's and were based on the structure of the transaction, the historical performance of similar receivables and CPS's experience as a servicer.  

The weighted average effective coupon on the notes is approximately 2.44%. 

The 2012-C transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance.  The final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of 11.00% of the then-outstanding receivable pool balance. 

The transaction utilizes a pre-funding structure, in which CPS sold approximately $105.3 million of receivables today and plans to sell approximately $41.7 million of additional receivables during October 2012. This further sale is intended to provide CPS with long-term financing for receivables purchased primarily in the month of September. The transaction also included $10.3 million of receivables originally originated by CPS in 2006 and 2007 that were recently repurchased from a securitization transaction which closed in 2007. 

The transaction was a private offering of securities, not registered under the Securities Act of 1933, or any state securities law. All of such securities having been sold, this announcement of their sale appears as a matter of record only.

Second Quarter 2012 Results (reported on 7/18/2012)

• Revenues for the second quarter of 2012 were $44.2 million, an increase of approximately $13.0 million, or 42%, compared to $31.2 million for the second quarter of 2011. 
• Earnings of $1.3 million, or $0.05 per diluted share, for its second quarter ended June 30, 2012. This compares to a net loss of $6.4 million, or $0.35 per diluted share, in the second quarter of 2011.

"The second quarter of 2012 marks another milestone in our recovery from the financial crisis," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer. "We are now growing our total managed portfolio sequentially as our new contract purchases are more than offsetting the runoff of the Fireside Bank portfolio and our 2007 and 2008 vintages. As we can see from our financial results, the operating leverage inherent in our business is once again becoming evident. This bodes well for our future profitability.

"Operationally, the second quarter was also solid. New contract purchases increased 15% from the first quarter and yields and credit demographics of the new paper remain attractive. Asset performance metrics continue to be very strong as well with year-over-year net charge-offs and delinquencies continuing to decline. In addition, we achieved another record low funding cost on our June securitization."