Investing in CPSS: A 227% Gain in Five Years

Five years ago, investing in Consumer Portfolio Services, Inc. (NASDAQ:CPSS) might have seemed like a risky bet. However, those who took the plunge have been rewarded with a staggering 227% gain. Let's delve into the factors that contributed to this remarkable performance and explore why CPSS remains an attractive investment opportunity.



Growth in Contracts Purchased

CPSS has consistently increased the number of automobile contracts it purchases. In the nine months ended September 30, 2024, CPSS purchased automobile contracts totaling $1,224.1 million, compared to $1,056.0 million for the same period in 2023. This represents a 16% increase in originations compared to the same period in 2023. This growth in originations has driven CPSS's revenue and profitability, contributing to its overall performance.

Increased Interest Yield on Loan Portfolio

CPSS has seen an increase in the interest yield on its loan portfolio. As of September 30, 2024, the interest yield on the total loan portfolio was 11.4%, compared to 11.3% in the prior year period. This increase in interest yield contributes to higher revenue and profitability, further enhancing CPSS's financial performance.

Robust Financial Performance

CPSS's financial performance has been steady, with revenue growing 10.8% year-over-year for the first nine months of 2024. Net income for the nine-month period was $14.1 million, compared to $38.2 million in the same period of 2023. Despite the decrease in net income, the company's revenue growth and increased interest yield have contributed to its overall performance.

Successful Securitizations

CPSS has successfully completed securitizations on a quarterly basis, resulting in four securitizations per calendar year. Since 1994, the company has completed 103 term securitizations of automobile contracts. These securitizations have helped CPSS access capital markets and sustain its operations, contributing to its growth and success.

Adaptation to Market Conditions

In 2021, CPSS began purchasing some contracts for immediate sale to a third-party, earning fees for originating the receivables and servicing the portfolio. This strategic move has diversified the company's revenue streams and provided an additional source of income, further enhancing its financial performance.

Strong Risk Management

CPSS's focus on prudent risk management and operational excellence has enabled it to navigate industry challenges and maintain a strong competitive position. The company's ability to manage credit performance, delinquency rates, and recovery metrics has contributed to its long-term success and has been a key factor in its 227% gain over the past five years.

In conclusion, investing in CPSS five years ago has delivered a remarkable 227% gain. The company's growth in originations, increased interest yield, robust financial performance, successful securitizations, adaptation to market conditions, and strong risk management have all contributed to this impressive performance. As CPSS continues to navigate the dynamic landscape of the auto financing industry, it remains an attractive investment opportunity for those seeking long-term growth and profitability.