RCII: Rent-A-Center Could Benefit From Consumer Credit Squeeze

My latest column is up at RealMoney.

I think Rent-A-Center (RCII) can benefit from the slowdown in consumer spending and the tightening of credit standards.

If Rent-A-Center were to receive the same price-to-book multiple as Aaron Rents, it could trade above $28 per share today. While I don’t believe that will happen overnight, over the next five years Rent-A-Center could see high-single-digit earnings per share growth and also expand its price-to-book multiple to the 1.9 level. The combination of earnings growth and valuation expansion could generate annual returns averaging 15% or more.

Here’s how the company scores on the Stock Market Beat models:

• Earnings momentum: Positive


• Earnings quality: Positive


• Price momentum: Neutral


• Free cash flow: Positive


• Return potential: Positive

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.