Why EZCORP Inc. Shares Fell Flat

EZCORP delivers yet another earnings miss in the second quarter. Find out whether these ongoing misses are a reason to avoid EZCORP, or if this dip could represent a buying opportunity.

Sean Williams
Sean Williams
Apr 30, 2014 at 3:15PM
Financials

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 EZCORP (NASDAQ:EZPW), a specialty financial services provider that operates pawn stores, as well as payday advance and loan locations, tumbled as much as 12% after the company reported disappointing second-quarter earnings results.

So what: For the quarter, EZCORP delivered total revenue of $260 million, down 3% year over year. The company attributed this drop to a sizable decline in gold scrapping due to the year-over-year drop in spot gold prices. Partially counteracting this weakness was strength in jewelry sales, which rose 27% on a same-store basis in the U.S., and consumer loan fee growth in the U.S. and Mexico. Adjusted profit for the quarter totaled $8 million, or $0.36 per share. By comparison, Wall Street had been expecting $263.3 million in net revenue and $0.38 per share. This marks EZCORP's fourth-straight EPS miss.

Now what: On one hand, earnings misses are getting to be so commonplace for shareholders in EZCORP that you'd think Wall Street and investors would have tempered their expectations by now. Moving back even further than a year, EZCORP has only managed to surpass Wall Street's projections in only two of the past 10 quarters. On the other hand, money lending and pawn brokering are two very high margin businesses that tend to perform well over the long run. With a single-digit forward P/E, and what I believe to be strong growth prospects in Mexico, I would suggest financially savvy and more risk-willing investors dive a bit deeper into EZCORP, as there could be impressive long-term value here waiting to be unlocked.