52-week range: $9.50 (Mar. 2, 2009) - $19.25 (Sep. 30, 2008)
What business is likely to prosper when economic conditions get really bad?
Pawnshops. EZ CORP operates about 294 in the US and 38 in Mexico while also offering payday loans through 71 of its pawnshops and 477 EZMONEY store fronts.
As you would expect sales and earnings have been booming as the world suffers through the worst recession since the 1930’s. Here are their (split-adjusted) per share numbers as reported by Value Line:
Year ........ Sales ........ C/F .......... EPS ....... B/V ....... Avg. P/E ... 52-wk Range
2002 ........5.39 .........0.34 .........0.07 ........2.86 ........13.9x ....... 0.40-1.70
2003 ........5.64 .........0.47 .........0.22 ........2.88 ..........5.6x .........0.90-3.00
2004 ........6.14 .........0.45 .........0.23 ........3.15..........12.6x ........2.20-5.20
2005 ........6.59 .........0.59 .........0.36.........3.46 .........12.3x ........3.10-7.40
2006 ........7.80 .........0.94 .........0.69 ........4.20 .........13.2x ........4.90-17.10
2007 ........9.01 .........1.15 .........0.88 ........5.23 .........16.3x .......10.10-17.60
2008 ...... 11.02 ........1.56 .........1.21 ........6.58 .........11.1x ........10.00-19.30
Over the six years 2002-2008 all aspects of the business surged while the valuation has contracted. Zacks and Value Line both see earnings of around $1.40 for this year and $1.64 - $1.70 for 2010. That makes the multiple just 8.5x the 2009 estimate and about 7.3x next year’s expectations.
The only other time EZCORP was available for a single-digit P/E was in 2003. Buyers of EZPW shares back then saw their shares rocket from $0.90 to $5.20 in one year, on their way to peaking at $17.10 by late 2006.
The balance sheet is solid with treasury cash exceeding total debt. Value Line gives EZCORP a ‘B++’ for financial strength (a very high mark from them for a small-cap issue). They also rank EZPW in the 80th percentile for stock ‘price growth persistence’ (with 100th being best).
A bounce back to even a historically low 11 times earnings would see EZCORP shares back at $15.40 by year-end 2009 and about $18 or better by the end of 2010.
Are those crazy targets? Not at all. EZCORP shares have actually traded at $17 and higher in each calendar year 2006-2007-2008 and 2009 to date. With all fundamentals growing nicely my goal prices may end up looking way too conservative.
I’m a buyer of the shares and a seller of puts right now. Here are the put premiums and their respective break-even points for those who might like to gain exposure at even lower than today’s quote.
................................................................ Net Break-Even Price
Sell March $10.00 Puts @ $0.65 /share .............. $9.35 /share
Sell March $12.50 Puts @ $1.90/share .............. $10.60 /share
Sell March $15.00 Puts @ $3.60 /share ............. $11.40 /share
EZCORP is a proven growth company with macro-economic tailwinds. How many companies can you think of that continue to show wonderful growth in the current economy, yet still trade at a single-digit P/E?
EZCORP shares could easily post 30% - 50% gains over the next 12 – 18 months.
Disclosure: Author is long EZPW shares and short EZPW puts.
___________________
Dr. Paul Price: After college at The American University [BS - 1971] and dental school at University of Pennsylvania [DMD - 1977] Paul served as a dental officer in the United States Air Force both domestically and overseas in Turkey and England. As his student loans diminished he was seduced by the market. From casual investing, starting in 1977, he devoted more and more time to equity research. In 1987 he made a full-time career switch by joining Merrill Lynch. Over the next 13 years he also worked with A.G. Edwards, Wheat First [now Wachovia Securities], and Ferris, Baker Watts. Dr. Price had enough success to retire in October 2000 but continues to help friends and family with their investments. He continues to give occasional investment seminars for civic groups and business schools.
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1. Stockdocx99 says on Oct 06, 2009 at 5:49 PM:
A Promising Stock Overlooked by Wall Street - From Smart Money.com
Tomorrow’s business headlines won’t be dominated by the company listed below. It’s too small, and their shares are covered by few analysts, vs. a median of 15 for the mostly large companies in the S&P 500 index.
Despite the limited attention, or perhaps because of it, this company boasts attributes lacking in many big companies today. It’s highly profitable and sales are up nicely compared with a year ago. The company is financially strong, with little debt and it’s attractively priced relative to their sales and profits.
EZCorp -
Projected 2009 Sales Growth: 29.6%
Return on Invested Capital: 18.6%
Austin, Texas-based EZCorp (EZPW: 14.29, +0.72, +5.30%) lends money to customers who aren’t creditworthy enough to go elsewhere.
It operates pawn shops, where customers put up items of value as collateral, and where shoppers buy items that borrowers don’t return for. It also operates payday loan stores, where customers can get expensive advances on their paychecks. Demand for both types of loans is up, but the payday lending business faces constant threats by federal lawmakers to reign in “predatory” fees, which can sometimes top 500% when calculated as an annual rate. (Defenders of payday loans argue that bounced check fees at banks can top 1000% when calculated as an annual rate against small account balances.)
Shares of EZCorp have multiplied sixfold in value in five years, yet they still sell for less than 10 times forecast 2009 earnings.
Regulatory risk might be more than priced into the stock. EZCorp has expanded aggressively into Mexico in recent years, where regulators are less strict. Also, according to analysis by Henry Coffey, who covers the shares for investment bank Sterne Agee with a “Buy” recommendation, EZCorp is worth its current stock price based on its pawn business alone.
Jack Hough is an associate editor at SmartMoney.com and author of “Your Next Great Stock.”
Tomorrow’s business headlines won’t be dominated by the company listed below. It’s too small, and their shares are covered by few analysts, vs. a median of 15 for the mostly large companies in the S&P 500 index.
Despite the limited attention, or perhaps because of it, this company boasts attributes lacking in many big companies today. It’s highly profitable and sales are up nicely compared with a year ago. The company is financially strong, with little debt and it’s attractively priced relative to their sales and profits.
EZCorp -
Projected 2009 Sales Growth: 29.6%
Return on Invested Capital: 18.6%
Austin, Texas-based EZCorp (EZPW: 14.29, +0.72, +5.30%) lends money to customers who aren’t creditworthy enough to go elsewhere.
It operates pawn shops, where customers put up items of value as collateral, and where shoppers buy items that borrowers don’t return for. It also operates payday loan stores, where customers can get expensive advances on their paychecks. Demand for both types of loans is up, but the payday lending business faces constant threats by federal lawmakers to reign in “predatory” fees, which can sometimes top 500% when calculated as an annual rate. (Defenders of payday loans argue that bounced check fees at banks can top 1000% when calculated as an annual rate against small account balances.)
Shares of EZCorp have multiplied sixfold in value in five years, yet they still sell for less than 10 times forecast 2009 earnings.
Regulatory risk might be more than priced into the stock. EZCorp has expanded aggressively into Mexico in recent years, where regulators are less strict. Also, according to analysis by Henry Coffey, who covers the shares for investment bank Sterne Agee with a “Buy” recommendation, EZCorp is worth its current stock price based on its pawn business alone.
Jack Hough is an associate editor at SmartMoney.com and author of “Your Next Great Stock.”
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2. Stockdocx99 says on Nov 06, 2009 at 12:34 PM:
UPDATE 1-Ezcorp Q4 beats Street; outlook above estimates
* Sees FY '10 EPS of $1.65-$1.69 vs est $1.64
* Sees Q1 '10 EPS of $0.41-$0.43
* Q4 EPS $0.42 vs est $0.41
* Revenue up 34 pct
Nov 5 (Reuters) - Pawn and payday lender Ezcorp Inc (EZPW.O) posted fourth-quarter profit that edged past market estimates by a penny as it gained from increased sales of jewelry scrapping and pawn service charges, and it forecast 2010 earnings above Street expectations.
Net income was $20.9 million, or 42 cents a share, compared with $16 million, or 37 cents a share, last year.
Jewelry scrapping sales increased 48 percent to $40 million, while pawn service charges rose 39 percent to $37.2 million.
Total revenue increased 34 percent to $164.8 million.
Analysts expected the company to earn 41 cents a share in the quarter.
Operational expenses grew 31 percent to $54.3 million.
U.S. pawn lenders are seeing a boost in revenue from their pawn operations as more consumers pawn gold for access to quick and easy cash due to higher gold prices. [ID:nBNG340597]
The company also said it expects to earn at least $1.65 a share in 2010 and at least 41 cents a share for the fourth quarter. Both the figures came above analysts' estimates by a penny each.
"In fiscal 2010, we plan to open 40 to 50 Empeno Facil pawn locations in Mexico, 35 to 45 Cash-Max payday loan locations in Canada, and six pawnshops in the United States," the company said.
EZPW shares are now trading at $14.30.
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3. Stockdocx99 says on Jan 18, 2010 at 9:43 AM:
ZACKS- Value selection:
EZCORP Inc. (EZPW: $17.91 /share) is scheduled to report fiscal first-quarter 2010 results on Jan 21. The company operates payday-lending stores and pawnshops in the U.S., Canada and Mexico for individuals who do not have cash or access to credit.
On Nov 5, EZCORP issued first quarter guidance of between 41 cents and 43 cents per share. Currently, the Zacks Consensus Estimate is holding right in the middle of the range, at 42 cents.
For fiscal 2010, the company forecast earnings per share in the range of $1.65 to $1.69. The 2010 Zacks Consensus is at the high end of that range, at $1.69 per share.
The company closed out fiscal 2009 with net income growth of 31%. Analysts are expecting earnings growth of 19.59% for fiscal 2010.
Expansion through acquisition and new store openings is still a key strategy for the company. EZCORP intends to open 40 to 50 Empeno Facil pawn locations in Mexico, 35 to 45 Cash-Max payday loan locations in Canada and 6 pawn shops in the United States in fiscal 2010.
Value Fundamentals
It’s been about a year since I last reviewed EZCORP. The company is still cheap, trading at just 10.8x forward earnings. EZCORP’s price to book ratio is 2.0. It has a PEG ratio only 0.69.
EZCORP is now a Zacks #2 Rank (buy) stock.
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4. Stockdocx99 says on Jan 21, 2010 at 10:03 PM:
Ezcorp Q1 beats Street; ups 2010 earnings outlook
Ezcorp Inc
EZPW.O
$18.25
* Q1 EPS $0.52 vs est $0.42
* Rev up 44 pct
* Sees 2010 EPS $1.81 vs est $1.69
Jan 21 (Reuters) - Pawn and payday lender Ezcorp Inc (EZPW.O) posted first-quarter profits that handily beat estimates, as revenue from jewelry scrapping and pawn service charges rose, and it also raised its 2010 earnings outlook.
The company posted a 73 percent increase in net income to $25.7 million, or 52 cents a share, compared with $14.8 million, or 33 cents a share, a year ago.
Revenue from jewelry scrapping surged 89 percent, while its pawn service segment saw a 55 percent growth.
Total revenue was up nearly 44 percent to $184.8 million.
Analysts expected the company to earn 42 cents a share on revenue of $160.5 million, according to Thomson Reuters I/B/E/S.
The company said it expects to earn 43 cents a share in the March quarter, while raising its 2010 earnings outlook to $1.81 a share from its previous projections of $1.65 to $1.69 a share. Analysts are expecting 2010 earnings of $1.69 a share.
Shares of Austin, Texas-based company closed at $18.25 Thursday on Nasdaq.
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