Sales were up 19% and earnings 10% for the most reason quarter, for this Mexican pawn shop operator.
First Cash Financial Services (FCFS)
from Periscope Report
First Cash Financial Services (FCFS) is the largest operator of pawn shops in Mexico, a country that has been in an economic recession for decades, which has made pawn shops an essential part of everyday life. Plus, more than 70% of adult Mexicans do not have a bank account, which means they have to cash their paychecks at the check-cashing centers located within pawn shops. Mexico remains a “cash-driven” society due to a myriad of factors, including inflation, political instability, a volatile currency, and lack of consumer credit.
We have been following FCFS for 15 years, watching it grow from 40 pawn shops to 900 pawn shops over that time. The growth in Mexico has been extremely prolific, mainly because FCFS does not face much competition south of the border. Of the 1,000 large format pawn stores in Mexico, FCFS operates more than half of them, making FCFS a market dominator—a vital attribute in making it a Top Recommendation.
FCFS has performed well in strong economies and weak economies. In strong economies, more people come back to pawn shops to retrieve their pawned items and payoff their high-interest loans. In weak economies, more people pawn their items for much-needed cash and do not pay back their loans, leaving FCFS with merchandise worth more than the original loan
FCFS opened or acquired 111 stores in fiscal 2013. It will open about 85 new stores this year, most of these in Mexico, a market which is far from saturated. The company will expand into other Latin American countries within five years. A great management team has been in place for 20 years.
This is a growth company trading for 16 times expected earnings, which greatly limits the downside risk. See attached report for more details.
Tom Byrne, The Periscope Report, 4025 Sunset Ridge Drive, Canyon Ferry Crossing, Helena, MT 59602, 406-465-4663, July 22 and July 29, 2014