Dollar Financial Shares Popped: What You Need to Know (AEA.DL, DLLR, EZPW)

Dollar Financial Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of check-cashing company Dollar Financial (Nasdaq: DLLR ) started 2011 off with a 10% bang on news that its subsidiary would acquire Purpose U.K. Holdings, which provides online payday loans, for roughly $195 million.

So what: Dollar Financial said the deal will solidify its leading position in the U.K., where it already operates more than 350 stores. The acquisition should "immediately" add to earnings, with Dollar Financial planning to update its 2011 outlook once the deal closes, so it's no surprise that Mr. Market is enthusiastically cheering the move.

Now what: I wouldn't be so quick to jump on today's pop. While Dollar Financial has been expanding its European presence with takeovers over the past year, its returns on equity still leave a lot to be desired. Shares of Dollar Financial are now up 40% over the past three months with today's pop, so more profitable rivals like Advance America (NYSE: AEA ) and EZCORP (Nasdaq: EZPW ) might be better bets going forward.

Interested in more info on Dollar Financial? Add it to your watchlist.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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