Pawnshop operator and payday lender Cash America (NYSE:CSH) will be reporting first-quarter 2007 financial results next week.

What analysts say:

  • Buy, sell, or waffle? Unlike with competitor EZCORP (NASDAQ:EZPW), five of the eight analysts covering Cash America have a bullish stance and rate it a buy. The other three say hold.
  • Revenues. Maybe it's the expected 19% increase in revenues, to $193 million.
  • Earnings. Or perhaps it's the 22% jump in profits that are expected. Wall Street might be cashing in on the rise in earnings to $0.62 per share.

What management says:
Cash America is another pawnshop operator that is making big moves into payday lending as a natural outgrowth of serving the unbanked and underbanked community. Last year, it bought online payday lender CashNet USA to help bolster short-term cash advance fees. The acquisition has been doing so well that earlier this month it made the first of five possible supplemental earn-out payments. While the $33.8 million payoff ends up nearly doubling the cost of the $35 million purchase (and with four more payments possible, the final tally could be considerably higher), it also serves to strengthen what Cash America had deemed was going to be a more lackluster quarter than previously forecast.

What management does:
With the price of gold remaining elevated, Cash America has been able to drive margins higher, as seen below. However, the coming quarter might tarnish the sheen because, with it being tax season, customers who receive refunds tend to pay off their outstanding balances sooner. Since payday lending continues to grow in importance to Cash America, such effects will continue to have a larger role in the future. On the positive side, loss provisions shouldn't be nearly as large, either.

Margin

12/05

03/06

06/06

09/06

12/06

Gross

61.9%

62.4%

62.7%

62.8%

61.8%

Operating

13.5%

13.9%

14.2%

14.6%

14.9%

Net

7.6%

7.9%

8.4%

8.6%

8.8%
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:
Following last quarter's earnings announcement, the stock sold off 10% and then tumbled some more in the weeks after, falling as far as $38 per share. I had suggested such a possibility was feasible, and believed it would be a wonderful buying opportunity should it occur. Cash America is financially fit and sets the foundation for a strong second half. The stock has since rebounded 14% off its lows and still sits at a discount to the highs it had achieved earlier. That bounce has given Cash America a multiple on par with First Cash Financial (NASDAQ:FCFS) and only slightly above Dollar Financial (NASDAQ:DLLR) and Advance America (NYSE:AEA). Cash America is not the bargain it most recently was, but it's not so far ahead of the field anymore either.

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 stock rating service by joining today. It's free!

Advance America is a recommendation of Motley Fool Inside Value. A 30-day guest pass lets you see why the largest pure-play payday lender is a recommendation.

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.