idea #18 World Acceptance Corp (WRLD)

World Acceptance Corporation came up on multiple screens.  It has high roa, buying back shares, too.  The share price is at a 52 week high.  I know statistically all these things likely mean the price will only go higher in the near term but their business makes me queasy... 84% of their loans outstanding are repaid with additional loans, i.e.  "payment in kind" type of refinance.  They charge the poor suckers who borrow from them anywhere from 25% to 215%, whatever the state maximum will allow.  The loans are unsecured.  The borrowers are repeat customers who borrow the most during the holiday season.  Rumor is that the new administration is going to crack down on consumer finance providers.  I guess these factors explain the valuation (it appears attractive, even though it trades at a 52-week high).  Credit card companies are having to lower their max rate, maybe WRLD will, too.

The more I read the more I actually like their business.  They're marketing all sorts of other things to their core customers; tax prep, insurance, and even electronics good.  They are near their customers (thus they pay low rent and have low fixed costs).  I don't know how to value their ongoing business but a valuation of their assets are easy: for $40/share you are buying $20 worth of loans to poor people.  You are getting an established business that lends to poor people, and up to now has thrown off quite a bit of cash to buy back shares.  They have low overhead.  I like this business and management appears to be smart so I will wait for it to go back down to $10 (half of all the loans) or $20, just the value of the loans.  I won't hold my breath but $40 is too much of a premium.