The industry's largest payday lender, Advance America (NYSE:AEA), will report first-quarter financial results on Wednesday, May 2.

What analysts say:

  • Buy, sell, or waffle? Four of the nine analysts covering the Motley Fool Inside Value recommendation are advancing the notion that it's a buy. The other five say hold.
  • Revenues. Revenues are expected to grow 10% to $166.6 million.
  • Earnings. Similarly, profits are expected to advance 13% to $0.28 per share.

What management says:
Continued expansion in the U.S. may now be followed by centers in both Canada and the United Kingdom. Advance America is looking beyond U.S. borders to seize additional opportunities. Others have found similar foreign success; EZCORP (NASDAQ:EZPW) is starting to open pawnshops in Mexico, and Dollar Financial (NASDAQ:DLLR) has been expanding its operations in Canada and the U.K., opening a total of 19 new stores in the two countries. Advance America's new prepaid debit card, offered at more than 2,200 centers, offers another growth avenue. President and CEO Ken Compton believes it will "drive incremental revenue" for the centers, beyond traditional cash advances.

What management does:
Along with being the largest payday lender, with more than 2,800 storefronts in 36 states, Advance America also tends to be the most focused. It generally offers only payday loans, unlike competitors such as Cash America (NYSE:CSH) or First Cash Financial (NASDAQ:FCFS), which offer ancillary services like pawnshops and buy here/pay here car dealerships. Such focus, however, carries both risk and reward. By doing one thing and doing it well, Advance operates a streamlined organization that consistently churns out profits.

Yet by not offering a range of services, Advance America risks getting walloped by any significant event that might affect its model, whether it's on the legislative or regulatory fronts, or in the overall economy. So far, though, its geographically diverse operations have helped to minimize such effects. Its new prepaid CashVantage card may also provide a big new opportunity not too far removed from its payday loan business.

Margin

12/05

03/06

06/06

09/06

12/06

Gross

60.1%

59.9%

59.4%

58.9%

59.4%

Operating

18.4%

18.6%

19.2%

19.6%

19.6%

Net

10%

9.9%

10.1%

10.4%

10.4%

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:
Despite its recovery since the FDIC changed the rules of the game on payday loans, Advance America continues to trade at a discount to its rivals. Its stock has advanced over the year, but not nearly as much as those same rivals. With another solid quarter anticipated, Advance America looks ready to continue its forward march.

Related Foolishness:

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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.