Roadkill.

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Author: Serafin, Tatiana

Used-car seller America's Car-Mart (19,CRMT) usually is very good at strong-arming deadbeat customers into repaying their car loans. It specializes in subprime customers in the South and keeps all their loans on its books, instead of unloading them elsewhere.

The collection effort hasn't worked so well lately, though. A surge in credit losses in the first six months of fiscal 2006 (ended October 2005) sent net income down 18% to $7.7 million on $114 million in sales. Payment delinquencies grew from 3.5% to 4.1%. And then there was the Internal Revenue Service examination of the 2002 tax return, still under way. The stock tumbled from $25 a year ago to $14 in November. But it is climbing back now.

Hold on. Ivan Feinseth, research director at Matrix USA, says more bad news is to come because of the slowdown in auto sales and increased competition from big guys like AutoNation and CarMax. The company's same-store sales growth has slowed from 11.5% to 8.1%. And credit losses show little sign of abating; Feinseth says the company's tough collection tactics will have little effect. Meanwhile, the outfit pays a lofty 8.9% for its bank loans. We say short the stock.

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GRAPH: Stock price

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By Tatiana Serafin