Avalon Research, a self described "institutional research boutique and brokerage firm", issued a report today accusing Rent A Center of over reporting Q3 earnings as much as 95% by under reporting depreciation.

Avalon
"Avalon Research believes that RCII's Q3 EPS could have been as low as $0.05 (well below the $1.14 reported) "if the company adopted a depreciation method that was more in sync with economic reality" Avalon maintains a Sell rating and $17 price target

RCII stock was trading flat until 1:00 pm, when the Avalon report hit the street. By 1:45 RCII had dropped 6%. Cooler heads prevailed and with a P/E ratio approaching single digits, the stock was seen as a bargain and closed today at $39.01, down 4.43% on 4 times average volume.

I have seen the Avalon report. At best it's uninformed opinion, at worst it is the ranting of those so out of touch with RTO reality as to be disturbing.

It attempts to cast doubt on the 'Income Forecasting' method of depreciation, a method used in some form by most Rent to Own companies for decades.

As proof, Avalon offers a side by side comparison of Rent A Center and Aaron Rents depreciation expense. The validity of this comparison is questionable. Those familiar with the industry recognize the vast differences in the two companies business models.

Avalon's $17 price target is based on a different depreciation model being imposed. Imposed why...and by whom? Answers to these basic questions are left up to the imagination of the suckers who just paid 19 bucks for the report.

As a final bit of ignorance, Avalon refers to Rent A Centers 'Get it Now' program in Wisconsin as a "Change in focus that raises a red-flag and could signal managements lack of confidence in the current business model". My seven year old is aware that 'Get it Now' (a financed retail transaction) is being implemented as a test in Wisconsin in response to a rabid (our opinion) Attorney General who has made it his life's work to end RTO in the cheese state.

We contacted Avalon for comment...no comment. One final note...Avalon has a Sell recommendation on 73% of all covered securities and has consistently rated Rent A Center a 'Sell' since early 2001, during which time, RCII has risen 17%...how do you spell
a n a l y s t:)