“EZCORP, Inc.’s (EZPW) bread and butter business is still the more than 1,000 pawnshops and personal finance services stores it operates in the U.S., Mexico and Canada. These stores provide collateralized non-recourse loans, payday, installment and auto title loans. But seeing opportunity in this underserved segment, EZCORP recently formed an e-commerce and card services division to focus on online lending and other digital forms of commerce. This group also manages the company’s prepaid debit cards.
“EZCORP also has interests in Albemarle & Bond Holdings, a U.K.-based jewelry-only pawn brokerage, and Cash Converters International, which franchises and operates a worldwide network of more than 600 stores that provide personal financial services and sell pre-owned merchandise. ... With its ample free cash flow—which would yield more than 8% if paid out as dividends—EZCORP should continue to make smart acquisitions while maintaining an exceedingly strong balance sheet, strengthening its position in the highly fragmented pawnshop industry. Even if the economy strengthens, we expect EZCORP to remain on a strong
upward trajectory. One reason is that many of its loans are collateralized with jewelry, so the company will continue to benefit from rising gold prices. For fiscal 2012 (ending September 30, 2012), per-share earnings should be up by more than 20% to above $3 a share. That should be followed by several years of earnings growth approaching 15% a year. Yet despite the robust profit gains of the last decade and prospects for strong gains ahead, the stock trades at a PEG ratio of less than 0.6. That low valuation results from investors’ concerns about a backlash against the rates non-payday lenders charge their customers. We think those concerns are overblown and more than reflected in the current share price. EZCORP was named to Fortune magazine’s list of ‘100 Fastest-Growing Companies’ once again this year, rising to No. 66 in 2011, up from No. 87 in the previous year. We look forward to seeing the company climb higher on the list next year and expect we will be handsomely rewarded along the way for holding the shares.”
Stephen Leeb, PhD., The Complete Investor, 12/11
