NCO Group Is All Set to Collect

Looking for a smart countercyclical stock to buck the economy's down trend? Thatcher Thompson of Merrill Lynch thinks he has uncovered one: NCO Group (NCOG ), the world's largest bill-collection company, whose stock in this nasty market has leaped from 11 in September to 33. ``Deep-value investors and hedge-fund managers have been buying into NCO, mainly due to its recession-proof appeal,'' says Thompson. At a time when many analysts are scaling back their estimates for companies they follow, Thompson has boosted his numbers for NCO: He has just revised his 2001 earnings estimate from $2.14 to $2.35 a share, and his 2002 figure from $2.50 to $2.82. It's a terrific countercyclical stock with a reasonable p-e ratio of just 13, notes the analyst, whose 12-month price target is 40.

NCO's contingency debt-collection business is ``highly predictable, profitable, and leverageable, and NCO has proved its ability to grow,'' says Thompson. Among its customers are banks, insurers, retailers, and phone companies.

An added attraction is NCO's 63% stake in NCO Portfolio Management, which buys and manages delinquent accounts receivable from credit-card companies. NCO Portfolio is scheduled to trade publicly soon through its recent merger with Creditrust.

Thompson expects NCO Portfolio to earn $1.08 a share in 2001 and $1.20 in 2002. NCO's share of these will be roughly 38 cents cents a share in 2001 and 46 cents in 2002, which are reflected in Thompson's estimates. NCO and NCO Portfolio are positioned, he says, to dominate the huge debt-collection and management industry.

By Gene G. Marcial

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