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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (71584)11/18/2022 11:33:23 AM
From: A11111 Recommendation  Read Replies (1) of 78670
 
I just checked CRMT's financials and they are in a lot of mess.

Really, the issue is their profitability. First is their interest expense. CRMT's debt is made of revolving credit facility and non-recourse note payables.

Revolving credit facility has 4 tiers based on d/e. CRMT is currently on level two with d/e of 1.2 where their interest rate is 2.35%+ proceeding SOFT (5.5% in Q1 22).

Their non-recourse debt is collateralised on an asset, auto loans in this instance, with an annual interest rate of 5.14%.

CRMT recently on their Q2 22 filing changed its debt structure. In Q1 22, they had $188M revolving CF and 323M on non-recourse. In their recent Q2 filing, that changed to $302M on revolving CF and $250M non-recourse.

CRMT took on more expensive debt, variable to interest rate hikes, to cut down their non-recourse debt. That tells me they are not confident in the future and worried they can't make payment. If d/e exceeds 1.5%, rates on RCF increase to 3%+SOFR which puts further strain on their earnings. SOFR rates are currently at 3.8%: squeezing their earnings even more.

Other cost which stood out is credit losses. Credit losses % sales jumped from 24% to 25% from Q1 to Q2. Honestly, this is so unrealistic of the real case. In 2018, credit loss rate % sales was 27.7% on 2-2.5% rates. Rates are now at 4% and expect it to increase. I wouldn't be surprised if it reached 30% by the end of the year.

Their revenue growth is a value trap. What's happening below sales are horrible.
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