Following on the heels of a robust quarter by Cash America
With credit markets so tight, analysts say it's natural that pawn shops like those operated by EZCORP, Cash America, and First Cash Financial
Yet EZCORP can easily service them, and reap exceptional profits, too. The company was forced to close 11 of its EZMONEY stores in Florida because the state said its fees were usurious, and to settle with Texas over its alleged failure to protect customer information. Yet operating income still jumped 47% this quarter for the pawn side of the business, while payday lending saw a 36% increase.
While the pawn business is definitely growing at a vigorous pace, the payday lending side remains challenged, despite rapid growth in areas where it's still allowed to operate. If politicians, regulators, and consumer advocates continue to hamstring specialty finance firms, EZCORP's bottom line will suffer sooner or later. Advance America
Despite having its payday lending business shown the door in Florida, EZCORP stands to become one of the state's biggest pawnshop operators with its recent acquisition of Value Financial Services. It expects the acquisition to be accretive to 2009's earnings, providing a nice complement to the Jumping Jack Cash stores in Colorado it bought last year.
For both trailing and forward earnings, EZCORP trades at a slight discount to rivals Cash America and First Cash Financial, though it has at least equal growth prospects. That gives the pawnshop operator a very tempting PEG ratio of 0.75, though its enterprise value-to-free cash flow ratio remains lofty. Advance America, World Acceptance
Further interest-free Foolishness:
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Fool contributor Rich Duprey owns shares of EZCORP, but he does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.