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Bear of the Day: JG Wentworth

Daytime television isn’t exactly the pinnacle of broadcast excellence. Now don’t get me wrong, I enjoy watching Maury break the news of the 8th potential baby’s daddy paternity results just as much as the next guy. And there’s something about hearing the snarky ferocity of Judge Judy snapping off on the sleezy businessman trying to take advantage of somebody that I can’t get enough of. That’s just the regularly scheduled programming filled with these gems. The real annoyance comes from the slew of commercials trying to sell me on a for-profit “college” that will train me in underwater basket-weaving. Or the personal injury attorney that’s brought ambulance chasing to broadcast television. Then there’s the fly-by-night car insurance operation that will give me a quarter what my car’s worth if I ever really needed it. But my favorite is the company with the catchy jingle trying to use future value calculations to get me to give up the money the ambulance chaser just got me.

Today’s Bear of the Day is JG Wentworth (NYSE: JGW). You know, “Call J G Wentworth. 877 CASH NOW. 877 CASH NOW…” There’s a commercial with a guy (I think) in an opera costume on the bus. Why someone in the opera needs to take the bus I’m not sure. Either way, JG Wentworth is focused on key sectors, including structured settlement payment purchasing, annuity payment purchasing, and lottery payment purchasing and pre-settlement funding. The company operates as two brands, JG Wentworth and Peachtree.

I don’t want to sound like I’m cheapening JG Wentworth’s business model. They do provide a legitimate solution for people who are receiving money from an annuity or structured settlement on a monthly, quarterly or annual basis. Rather than having to wait for you money, JG Wentworth will offer you cash up front so you can take care of bills and expenses now and surrender your future payments to JG Wentworth.

Analysts have seen sporadic growth from JGW and as a result have revised their earnings estimates for the current year and next year. Over the last 30 days, four analysts have revised estimates to the downside for the current year and three have done so for next year. The result has pushed estimates down for the current year from $1.71 all the way to $1.45 while next year’s consensus has plummeted from $1.91 all the way to $1.58. Another factor that’s hurting JGW, giving it a Zacks Rank #5 (Strong Buy) is the recent earnings disappointment. Earnings came in at 22 cents last quarter versus estimates for 46 cents.

Equally as disappointed are the shareholders. JGW stock has dropped from nearly $20 last March to the $9.48 level it closed at yesterday. It appears that the stock has retested the lows from last May and failed. The last big jump and countertrend rally for JGW came in August after hopeful Q2 numbers were released. After a disappointing Q3 the stock is wallowing below the double-digit mark.

Investors looking to invest in other companies within similar industries should take a closer look atEssent Group (NYSE: ESNT) and Walker and Dunlop (NYSE: WD). Both are Zacks Rank #1 (Strong Buy). 

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