EZCORP (NASDAQ: EZPW) is
one of the largest pawnshop operators in the United States. The firm offers non-recourse loans collateralized by tangible personal property, commonly known as pawn loans, through 294 EZPAWN locations in the U.S. and 30 outlets in Mexico. It also sells merchandise at these locations, primarily collateral forfeited from its pawn lending operations. The company offers short-term non-collateralized loans, often referred to as payday loans, at 461 EZMONEY shops and 71 of its EZPAWN locations.
The stock popped earlier in the week, on word of upside guidance from competitor Cash America International (NYSE: CSH). Shares then kept rising, when EZCORP upped its own numbers the next day. Management said it expected fiscal Q3 EPS of 25 cents, a figure above previous guidance (21 cents) and the consensus Street view (21 cents). The CEO cited stronger than expected sales in the company's EZPAWN stores and lower than expected signature loan bad debt in its EZMONEY shops. The firm also boosted Q4 EPS guidance to 35 cents (35 cent consensus) and FY08 EPS guidance to $1.19 ($1.15 consensus). Roth Capital subsequently reiterated its "buy" rating on the shares and raised its price target to $19.
The stock
is currently in a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with two "strong buys", one "buy" and one "hold". Analysts expect a 25% growth rate, through the next year. The EZPW P/E ratio (12.95), PEG ratio (0.68), Price to Sales ratio (1.29), Price to Book ratio (2.21), Price to Cash Flow ratio (9.87), Price to Free Cash Flow ratio (12.52), Sales Growth rate (26.79%), EPS Growth rate (30.43%), Return on Assets (17.59%), Return on Investment (19.52%) and Return on Equity (19.79%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 86% of the outstanding shares. Over the past 52 weeks, the stock has traded between $10.00 and $16.42. A stop-loss of $13.70 looks good here. Note that the firm is expected to release fiscal Q3 results on July 24th, after the close.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in either of the stocks mentioned above.
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