Posted on March 29, 2021
Because of the Pesach holiday, today’s trade will be abridged, direct and profitable in extremis.
So without any further Latinate suffixes…
Our attention devolves today upon Rent-a-Center Inc. (NASDAQ:RCII), the lease-to-own refrigerator hawkers from Plano, Texas.
RCII is, in fact, a great business. But like many a great business, it was also subject to too much attention during the Batflu hysteria, and simply got overbought.
Fundamentals are reasonable (P/E is 15.87, P/B is 5.42 [e-GAD!], and Dividend Yield is 2.09%), but it’s in the technical realm where the excesses show up (see below).
RCII missed estimates, though its year ago fourth quarter numbers did improve.
The stock gained largely on the back of strong guidance from management, and a great deal of momentum from the current mania for growth stocks, all of which make investing in RCII an extremely risky proposition, in our view.
For that reason, we believe earnings revisions are on the way lower for the company, along with a general contraction of multiples as the overall market decline accelerates and expectations for equities return to more earthly levels.
With kind regards,
Hugh L. O’Haynew