EZCORP, Inc. (NASDAQ:EZPW)

WRLD clone

Lots of cash flow, making many acquisitions which should prove lucrative down the road. You may have to hold this one for a while, but you'll get your return if you wait! Refer to the 10-K

EZPW is hanging around 52-week lows with 2 overhangs: gold's price decline, and pending regulation.

Gold scrapping has become important to EZPW, from being almost nothing just a few years ago. For many businesses, gold going down is a new thing. However, EZPW started hedging gold in 2012. If effective, this should cushion any losses from this.

Regulation, yet to be proposed, poses a burden on all businesses in an industry. Smaller, weaker players can't afford to amortize the cost of compliance across enough business, and end up exiting. This leaves more market for those who are strong enough to survive. Eventually, the cost of compliance is passed on to the end customer. For a recent example, look at the impact of regulations on banks preventing trading activity. To make up for this, many new fees began to pop up in people's checking and savings accounts, in order for banks to maintain their profits. I think something similar will happen: in absence of high interest, a number of "processing fees" will make the cost of payday lending the same, or more.

I came across EZCORP by accident, since its outside of my core focus area of energy, health care, and biomanufacturing. At first glance I liked what I saw: revenue growth of 65% since 2009, net income margin increasing from 11.5% in 2009 to 14.5% last year, plenty of growth left in the tank, and its actually trading near book value. I even added it to my top watchlist (nicknamed "Shopping List"), which is a tough one for any company to crack.

Intrigued by the latest drop I decided to look into things a little deeper and bust out the ol' TI-82 that accompanies me in all of my deeper analysis. I'm mean on a TI-82, btw. And that's when this "too good to be true story" became just that. In my eyes anyway.

Scouring over the balance sheet you'll notice that goodwill + intangibles tallies up to $488.7 million. With total assets totaling just $1,337 million the intangible asset ratio, or IAR, sits at 36.5%. I start unfolding the red flag around 17% and raise it to the top of the pole at 20%.

That may not be a big deal for most people, but the way I look at it there's a lot of funny money factored into the stock's book value. You know, that thing its supposedly trading near? If we do a simple adjustment of goodwill + intangibles to the threshold of 20%, then book value drops from $912 million to $690 million, or about $13 per share.

That's not exactly a bad number for a company in acquisition mode with years of growth ahead. Remember, many growth companies routinely trade at such premiums. But with the average analyst pegging the annual 5-yr growth rate at 15% you have to question if you can't find better returns elsewhere (I don't put much faith in analyst estimates either way, but still).

I won't be parking money in EZCORP at these numbers. I've learned to stick to my guns with personal trading rules, because if you start making exceptions you'll get burned and wish you didn't. That doesn't mean the stock won't treat long-term investors well. I just don't want to be holding shares when growth slows and the share price goes cliff-diving (See growth stocks ARCO, TRLG, MAKO, etc.)

Good enough to keep me in on CAPS though.

Current downtrend, while scary and having cost me points, is not enough to make me end this pick.

Actual value roughly $30 by my system.

fv 35.32

Intrinsic value estimate between $35 and $50

Has seen its net profit margin and book value increase steadily over the past years

ROE consistently above 15

A very respectable current ratio of > 6

ZERO debt

PEG ratio way below 1

In addition, the pawn shop business does great in tumultuous times and is becoming more and more accepted, partly due to the numerous TV shows. I'm convinced!

What is there not to like? Increasing net margin, current ratio of more than 4, P/E below 10, solid ROE above 15, debt/equity ratio below 0.5. My calculations using valuespreadsheet.com gave me a fair value estimate between $35 and $55.

These guys showed up on a very specific Scrooge-style stock screen I ran on this site. I looked at a few more details, and didn't see any particularly good reasons that they wouldn't outperform the market average over the next few years, liked the business itself, so I went with it.

Investors seems to pawn this stock. Go long and short gold?

OUTPERFORM!

I like the growth, like the company, like almost everything except those in charge. I question the management and corporate structure.
EZCorp, Inc. Beneish M-Score: -2.6 ( as of Jun12)

Unfortunately, the middle-lower to lower wage earners continue to struggle. Universal healthcare threatens # of hours available to be worked by part-time employees. We're in a global recession - wages will remain tight across the board except at the top levels. Bottom line- times are tough and these small loan operators will do well - also think gold will hold up since the global currency printing initiatives are not waning

Just went under an 8 P/E for a company that is a consistent grower, has great fundamentals. This business model is never going away. It seems that management has had a few hiccups, stupid but correctable. Wall Street can't trust this company because they missed analysts expectations the last three times. Perhaps they are managing the company for the long term vs. quarterly numbers. Management has plenty of skin in the game as well. At this price, I'm a buyer. If it pops more than 10% in the next few sessions, otherwise I may hold it a bit.

Used CAPS to generate a Greenblatt type list: 5 star stocks weighted with ROE / GM (Good) and PE/PB (Cheap).

http://www.google.com/trends/?q=pawn+shop&ctab=0&geo=all&date=all&sort=0

They missed analyst estimates by .05, but still had record revenues, and they are at the low end of their 52 week range. I would wait a few more weeks before I buy this one or CSH, because I think they might miss the mark as well likely for one of the same reasons--Price of gold dropping and less is being traded in=lower margins.

Giving the Pawn Shop Experience a make over, this cheap growth stock is in the right place at the right time as American pop culture has gone Pawn Shop crazy

This one is really cheap (forward P/E around 6.8 to 7, not seen since 2009) and has good financial and growing earnings, in the late teens (%). I think the incident about less people using gold as collateral in these pawn shops has been way too overblown. It's profit margin may be lower but this one still looks good for a long term buy, especially when it has little debt a great advantage in recessions, when people need cash