I first wrote about EZCORP (
EZPW) (14.28, $704mm market cap) in
early 2008 and have followed it closely every since. In fact, it is one of only two names I have held since inception over the past 18 months in my
Top 20 Model Portfolio (Catalyst Health (CHSI) is the other). It has been quite the ride, as it ended 2008 up about 35% but was cut almost in half from its Q4 peak at the March lows. This year has seen some sharp moves up and down, but it is still down 6% y-t-d after surging post-earnings on Friday. I expect the stock could move to an all-time high price over the next year, potentially appreciating 60% to 23.
EZPW is primarily a pawnshop operator with a secondary business in payday lending. In the big picture, the company provides credit to those without access (a large and growing population!). The company is classified as a Financial, but it is really a hybrid. Unlike most financial companies, it isn't leveraged (pro forma net debt to cap is <10%). It derives a significant portion of its earnings from the sale of used goods, so it is a retailer as well. The pawn business remains very attractive. The company did two acquisitions last year and plans to open six de novo stores this year. Payday lending expansion has stopped, with the company pursuing additional products to mitigate regulatory risk, including auto title loans and installment loans. Mexico has been a source of growth, and the company will open about 50 stores in the coming year. Some of these are typical general merchandise stores, but the majority are 400 s.f.
