April 20, 2012
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 pawnshop operator EZCORP (Nasdaq: EZPW ) plunged 14% today after its quarterly results and full-year outlook disappointed Wall Street.
So what: EZCORP's second-quarter revenue climbed a solid 20%, but a miss on the bottom line -- EPS of $0.73 versus the consensus of $0.76 -- is triggering concerns over its long-term profitability. Management noted that customers have been using their general merchandise, as opposed to gold, to meet their quick-cash needs, which would likely work to pressure margins and delay income.
Now what: Thanks to those headwinds, EZCORP was forced to cut its full-year EPS outlook about 6% to $2.85 to $2.95. "We expect earnings growth in the back half of the year to be slightly slower than we originally expected," CEO Paul Rothamel cautioned. "Nevertheless, the fundamentals of all our cash solutions businesses, including our inventory and loan yields, remain strong and we are filling the pipeline with new stores, new products, and additional talent." With the stock now flirting with its 52-week low and trading at a forward P/E of nine, buying into that optimism seems like a decent move.
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