The company earns money by charging high prices for its goods, setting high interest rates and fees on its financing, and re-letting items returned to it. For example, choosing a refrigerator at random on its site, the price of the “same cash” Rent-A-Center is $ 1,763.52, compared to $ 1,399 for an identical model at a familiar national retailer. For consumers who don’t pay cash, the Rent-A-Center price is $ 29.99 per week for 98 weeks, or $ 2,939.02 in total.
With inflation higher in recent times than it has been for many years, the most recent jobs report shows a surprisingly low number of filled jobs and declining consumer confidence, the stagflation specter made a comeback. Add to that it looks like the Federal Reserve is gearing up to start crunching credit again, and you’ve got all the conditions for a near-perfect economic storm. And the people on the brink are just the demographic that tends to use Rent-A-Center’s services.
Analysts expect Rent-A-Center to grow more than 30% annualized earnings over the next five years, compared to flat earnings over the past five. The company is now trading at around 15 times its current profits, a valuation that will look like a good deal if this expected growth materializes.