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EZCORP, Inc. – Profiting from Tough Times -EZPW

August 17, 2009 | About:
EZCORP Inc. [NDQ:EZPW] August 17, 2009 - $11.90 @ 11:40 AM EST

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.

About the author:

Dr. Paul Price
http://www.RealMoneyPro.com
http://www.TalkMarkets.com

Visit Dr. Paul Price's Website


Rating: 2.4/5 (11 votes)

Comments

Dr. Paul Price
Dr. Paul Price premium member - 4 years ago
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.”

Dr. Paul Price
Dr. Paul Price premium member - 4 years ago


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.
Dr. Paul Price
Dr. Paul Price premium member - 4 years ago


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.

Dr. Paul Price
Dr. Paul Price premium member - 4 years ago




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.

Dr. Paul Price
Dr. Paul Price premium member - 4 years ago




Zacks loves EZPW now …

EZCORP, Inc. By: Tracey Ryniec

March 23, 2010

EZCORP, Inc. (EZPW), the pawn shop operator, is attractively valued with a forward P/E of just 11.2x and a PEG ratio of 0.73.

EZCORP operates pawnshops where it provides loans and credit services to customers who have short-term cash needs.

The company offers non-recourse loans collateralized by personal property in its stores, known as pawn loans. It also offers payday loans, installment loans and auto title loans.

As of Dec 31, 2009, EZCORP operated retail stores in 920 locations, including 370 pawnshops in the U.S., 70 pawnshops in Mexico, 472 short-term consumer loan stores in the U.S. and 8 short-term consumer loan stores in Canada.

Revenue Rises 44% in the 2010 Fiscal First Quarter:

On January 21, EZCORP reported its 2010 fiscal first quarter results, which was through Dec 31, 2009. It easily surprised on the Zacks Consensus Estimate by 23.8%.

Earnings per share were 52 cents compared to the Zacks Consensus of 42 cents. The company made 33 cents in the year ago quarter.

Revenue jumped 44% to $184.8 million over the first quarter of fiscal 2009. EZCORP saw gains in the U.S. pawn and the EZMONEY operations.

Revenue grew 23% in the Mexican operations but expenses at new stores impacted the net results.

“In all segments of our business, we saw strong loan demand. It appears that our broadened range of loan offerings provides solutions to consumers’ cash needs and are found to be more attractive than other options,” said Joe Rotunda, President and Chief Executive Officer.

Fiscal 2010 Guidance Raised:

The company continues to expand its worldwide operations with retail growth in Mexico, entry into Canada and affiliations with companies in the United Kingdom and Australia.

EZCORP now expects to open 40 to 50 Empeno Facil pawn locations in Mexico and 35 to 45 CASHMAX payday loan stores in Canada by the end of the fiscal year.

Additionally, it is forecasting 6 new domestic pawn stores during that same time.

It raised its earnings guidance to $1.81 per share compared to the $1.42 earned in fiscal 2009.

For the fiscal second quarter, it forecasts EPS of 43 cents, up from 37 cents a year ago.

EZCORP is expected to report second quarter results on Apr 15.

Zacks Consensus Moves In Line With the Forecast

Not surprisingly, given the company’s guidance, the Zacks Consensus for the second quarter is currently at 43 cents, which is what the company forecast for the quarter.

Fiscal 2010 Zacks Consensus Estimates jumped to $1.83 from $1.69 in the last 60 days due to the guidance revision. That is 2 cents better than the company is currently forecasting.

This is earnings growth of 29.58% over the year ago period.

Value Fundamentals:

EZCORP is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 2.1 which is under 3.0 and within the value parameters.

EZCORP also has a strong 5-year average return on equity (ROE) of 17.3%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

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