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Asset Acceptance Capital Corp's shares fell about 12% in trading Tuesday after Jefferies & Co. analyst Richard Shane - citing a difficult environment for collections and performance against debt buyer peers - downgraded the stock from "hold" to "underperform."

In a research note, Shane indicated he expects collections will be tough in the second half of 2008, which likely will impact cash collections as Shane sees slow growth for that measure in the third and fourth quarters. "We continue to expect the growth rate of collections to decline throughout 2008 as energy and food inflation coupled with real estate deflation exerts growing pressure on disposable income," Shane wrote.

Shane added that Asset Acceptance's valuation relative to its publicly traded debt-buying peers – specifically Encore Capital Group and Portfolio Recovery Associates – "cannot be justified." He noted that Asset Acceptance's price-to-earnings ratio is some 50% higher than that of its two peers that Shane also tracks.

Shane also noted that any positive impact felt by lower debt portfolio prices will be muted in the short term. "The impact from 2008 vintage purchases will be overshadowed during the next few quarters due to a more difficult collections environment and the drag from lower returning 2006 and 2007 vintage performances," he wrote.

The company's stock rebounded slightly, about 1%, in midday trading today at $10.30.

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