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Perhaps EZCorp (NASDAQ: EZPW) will have to create a section for surfboards and snakebite kits to accommodate the customers they hope to gain in Australia by investing in pawn shop operators, Cash Converters International Ltd.The Texas based pawn shop and check cashing company invested $45 million for a 30% stake in the Cash Converters getting two seats on the board and making a grand leap half way around the world. Just last year they bought outright a Mexican company, expanding their North American operations.
Last December EZCorp was included on my list of nine suggestions for 2009. Since that time it has remained one of the two laggards. I still believe in the company that continues to expand, using its own cash as it maintains a very low level of debt.
In June I posted Chasing Value: EZ Corp down -- opportunity knocks and encouraged folks to take advantage of a buying opportunity created by uncertainty about legislation that could affect profit margins. I own all of the stocks I originally recommended and added to my EZPW position at $11.00. The stock closed yesterday at $12.41.
Everything I liked in December, I like even more now. I have made EZCorp one of my larger positions. It still has a P/E of 12 which is about 20% below the market average. To me a company that is expanding as fast as it is and only has a P/S and a P/B hovering around 1.4, combined with an ROA, ROE, and ROIC all around 20%, almost no debt and with increasing profits and cash-flow is still mispriced by the market today.
The only thing EZPW does not have going for it is a dividend. However, this is truly a growth story, as it cleans up a traditionally seedy business, expanding as fast as any franchise I know of, both organically and by acquisition, without having to invent anything.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own stock and actively trade options in EZPW.
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