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Why DFC Global Shares Got Crushed

By Brian D. Pacampara, CFA - Apr 1, 2013 at 4:00PM

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Is this meaningful? Or just another movement?

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 payday lender DFC Global (NASDAQ: DLLR) plummeted 20% today after its preliminary quarterly results and guidance missed Wall Street expectations.

So what: DFC's preliminary third-quarter results -- operating EPS of $0.20-$0.24 versus the consensus of $0.63 -- and full-year outlook were so disappointing that analysts have no choice but to recalibrate their growth estimates. Management blamed the gloomy outlook largely on new lending guidelines in the U.K. -- where many outstanding consumer loans have now become immediately due -- giving investors plenty of negative vibes about DFC's operating environment going forward.

Now what: Management now sees 2013 operating EPS of $1.70-$1.80, well below its prior view of $2.35-$2.45, as well as the average analyst estimate of $2.35. "While we are naturally disappointed with our fiscal third quarter performance, we still believe we are well positioned to meet the growing needs of our customers in the United Kingdom once we move beyond this transitory period," Chairman and CEO Jeff Weiss reassured investors. With the stock hitting a new 52-week low today and trading paltry forward P/E of 5, buying into that turnaround talk might even be worth considering.

Interested in more info DFC? Add it to your watchlist.

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