Pawn-shop operator and payday lender Cash America (NYSE:CSH) will report Q4 2006 financial results on Jan. 25, with hopes of higher revenues and earnings clicking in.

What analysts say:

  • Buy, sell, or waffle? Six analysts surveying Cash America's landscape rate it a buy, and two rate it hold.
  • Revenues. Revenues are forecast to come in 12% higher for the fourth quarter, rising to $192.7 million.
  • Earnings. Profits are expected to cash in north of 32%, at $0.73 per share.

What management says:
Cash America believes that providing short-term loans to the country's "unbanked" and "under-banked" population will continue to drive its success in both the fourth quarter and fiscal 2007. For an area that had once comprised less than 10% of the company's revenues, Cash America is pushing payday loans toward accounting for between 25% and 30% of total revenues. New stores acquired within the past year or so are maturing into greater profitability, and the company will be integrating its acquisition of online payday loan operation CashNetUSA.

While pawn operations are still highly dependent upon the price of gold, that precious metal has actually risen by about 14% over the past three months. So even though Cash America will have to pay higher prices to its customers for their merchandise, it will also be able to sell those items for more afterwards. Expect higher margins here.

What management does:
Pawn shops and payday loans are both fairly high-margin operations. Profit margins on customer merchandise were essentially flat in the third quarter, but for the nine-month period of the fiscal year, they rose by 50 basis points. Payday loans, which (as noted above) are becoming a bigger part of Cash America's operations, are also a lower-cost operation to run. That's helping to push bottom-line margins up.

Margin %

09/05

12/05

03/06

06/06

09/06

Gross

61.7

61.9

62.4

62.7

62.8

Op.

13.2

13.5

13.9

14.2

14.6

Net

1.6

7.6

7.9

8.4

8.6
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:
Cash America continues to sport industry-leading values on both a trailing and forward basis. Although management has firmed up its guidance for the quarter, narrowing the range in which it expects to produce, most of those expectations have been built into the stock already, and its valuation -- though perhaps not on par with the rates it charges for its loans -- is nonetheless richly priced. Look for good results and lackluster stock performance.

Competitors:

  • Advance America (NYSE:AEA)
  • Dollar Financial (NASDAQ:DLLR)
  • EZ Corp
  • First Cash Financial
  • QC Holdings (NASDAQ:QCCO)

Related Foolishness:

Cash America has earned a four-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!

Advance America is a recommendation of Motley Fool Inside Value. See why the largest of the payday lenders is a stock to cash in on with a 30-day guest pass.

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