2 Reasons ATLC is Risky and 1 Stock to Buy Instead

Atlanticus Holdings trades at $59.85 and has moved in lockstep with the market. Its shares have returned 8% over the last six months while the S&P 500 has gained 11.3%.

Is now the time to buy Atlanticus Holdings, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Atlanticus Holdings Not Exciting?

We don't have much confidence in Atlanticus Holdings. Here are two reasons there are better opportunities than ATLC and a stock we'd rather own.

1. 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.

Atlanticus Holdings’s full-year EPS dropped 27.4%, or 6.2% 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 $525.9 million of cash and $6.06 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 $163.8 million of EBITDA over the last 12 months, we view Atlanticus Holdings’s 33.8× 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

Atlanticus Holdings’s business quality ultimately falls short of our standards. That said, the stock currently trades at 7.7× forward P/E (or $59.85 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.

Stocks We Would Buy Instead of Atlanticus Holdings

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