RM

We rate Regional Management Corp. (RM) as a Reduce with a composite score of 43.1/100 at a current price of $31.83. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in value (62th percentile) and quality (61th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (24th percentile) and investment (29th percentile) tempers our overall conviction. We assign a No Moat rating (25/100), High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Regional Management Corp. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 43.1/100 places it at rank #3096 in our full 7,333-stock universe. At $382M in market capitalization, Regional Management Corp. is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 16%, though momentum at the 36th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 40% (-36.5pp vs sector) narrow to operating margins of 8% (-8.8pp vs sector) and net margins of 6.2%, yielding a gross-to-net conversion rate of 16%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $31.83, Regional Management Corp. is trading near fair value based on current fundamentals. Our value factor score of 62/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 8.4x (a 29% discount to the sector median of 11.9x), EV/EBITDA of 38.1x (at a premium), P/B of 0.9x, P/S of 0.5x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a High uncertainty rating to Regional Management Corp.. Key risk factors include significant leverage (440% debt-to-equity), below-average price stability (24th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (440% debt-to-equity); below-average price stability (24th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 24th percentile and quality factor at the 61th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: a 3.08% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Regional Management Corp.'s capital allocation as Poor. Key concerns include elevated leverage (440% D/E), weak asset returns (ROA 1.9%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Regional Management Corp. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Regional Management Corp. receives a Reduce rating with a composite score of 43.1/100 (rank #3096 of 7,333). Our quantitative framework assigns a No Moat (25/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 42/100.

Our analysis does not support a constructive view on Regional Management Corp. at this time. The combination of limited competitive advantages, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.