Pawn shop operator and payday lender First Cash Financial (NASDAQ:FCFS) will report Q1 2007 financial results on Wednesday, April 18.

What analysts say:

  • Buy, sell, or waffle? Analysts are hot for the company with cold cash, as seven of the eight covering it rate it a buy. Only one says hold.
  • Revenues. Could be because additions to its business model -- like a used car dealership -- are expected to help push up revenues by 54% to $85.8 million.
  • Earnings. Profits are also expected to flow through the register at a 30% clip, or $0.30 per share.

What management says:
First Cash Financial has taken a broad view of the industry it serves. Not only do pawn shops and payday loans comprise large portions of its revenue streams, but it has added the used car dealerships and looked across the border to Mexico to expand its operations. The results have been dramatic. Notes vice chairman and CEO Rick Wessel, "Our consistently strong operating results over this six-year period are the result of our diversified expansion strategy, operating discipline and focus on key financial metrics." That's including the opening of a 400th store, 150 pawn shops in Mexico, and its second stock split in the past three years.

What management does:
The costs associated with its expansion plans have been eating away at margins. Yet, as the stores mature, they contribute greater amounts of profits to the company. So while a pawn shop operator or payday lender may see declining results in the short term as it grows out its footprint, the plans should pay off down the road. Advance America (NYSE:AEA), EZCORP (NASDAQ:EZPW), and Dollar Financial (NASDAQ:DLLR) have all seen similar outcomes. That is, assuming industry scrutiny from Congress and consumer advocates doesn't turn the tide against it.

Margin

12/05

03/06

06/06

09/06

12/06

Gross

63.5%

64.0%

63.7%

62.7%

60.7%

Operating

18.9%

19.5%

19.4%

19.3%

18.7%

Net

12.2%

12.4%

12.5%

12.3%

11.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
First Cash Financial is diversifying its revenues to tap into a broadly defined market for its services. Pawn shops, which traditionally rely upon the price of gold, can offset the subprime market (whether it's payday loans or mortgage lenders) that's currently getting a lashing in the halls of Congress. The buy here/pay here car dealerships are an interesting play. Though the segment is probably too small and too parochial at this point to make a big difference, expansion is possible, and the sector did give a boost to earnings last quarter. In addition, Mexico has a largely unexploited pawn market that can help the company's bottom line, which may explain why First Cash Financial was the favorite financial stock of 2007 of fellow Fool Tom Taulli.

Related Foolishness:

First Cash Financial has earned a five-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock rating service by joining today. It's free!

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. Advance America is a recommendation of Motley Fool Inside Value. The Motley Fool has a disclosure policy.