Just Pawn It!
Roberto over at NasdaqTrader brought to my attention that Pawn Shop stocks have been on fire lately. The three big ones are First Cash Financial Services (FCFS), EZCorp (EZPW), and Cash America (CSH). Below is some research I did on the three companies.
For comparison Walmart and Target had operating margins of 6.5% and 8.7% respectively in Q4 2005.
Just a reminder that gross profit margin measures a retailers markup over wholesale. The higher the better, unless you are a discount store like Walmart.
Growth Drivers
1. Higher spot gold prices
2. Reduced "holding" Period from 90 days to 60 Days
3. Higher gas prices, higher utility bills, & people needing a cash advance
4. Acquisitions
5. Franchising opportunities.
First Cash (FCFS)
Operating Margin = 21.5%
Gross Profit Margin = 41.0%
Cash America (CSH)
Operating Margin = 19.1%
Gross Profit Margin = 38.7%
EZCorp (EZPW)
"The company's pawn division has been benefiting in the March quarter from the robust merchandise sales and healthy scrap gold margins, the analysts say. EZCORP has gradually decreased its loan term from 90 days to 60 days, which the analysts believe is boosting the companyÂs sales."
Favored by IBD: Accumulation Distribution = A
Operating Margin = 13.6%
Gross Profit Margin = 66.1%
Other Cash Advance Stock: ACE Cash Express Inc. (AACE), Dollar Financial Corp. (DLLR)
For comparison Walmart and Target had operating margins of 6.5% and 8.7% respectively in Q4 2005.
Just a reminder that gross profit margin measures a retailers markup over wholesale. The higher the better, unless you are a discount store like Walmart.
Growth Drivers
1. Higher spot gold prices
2. Reduced "holding" Period from 90 days to 60 Days
3. Higher gas prices, higher utility bills, & people needing a cash advance
4. Acquisitions
5. Franchising opportunities.
First Cash (FCFS)
Operating Margin = 21.5%
Gross Profit Margin = 41.0%
Cash America (CSH)
Operating Margin = 19.1%
Gross Profit Margin = 38.7%
EZCorp (EZPW)
"The company's pawn division has been benefiting in the March quarter from the robust merchandise sales and healthy scrap gold margins, the analysts say. EZCORP has gradually decreased its loan term from 90 days to 60 days, which the analysts believe is boosting the companyÂs sales."
Favored by IBD: Accumulation Distribution = A
Operating Margin = 13.6%
Gross Profit Margin = 66.1%
Other Cash Advance Stock: ACE Cash Express Inc. (AACE), Dollar Financial Corp. (DLLR)
posted by Big Ben at Saturday, April 22, 2006
2 Comments:
Ben, Thanks for bringing this sector to our attention. Could be very interesting.
Over the past couple of weeks, CSH appears to be going up with decreasing volume.. maybe time for a pullback?
I actually think that pawning is a much better alternative than small business cash advances than payday loans or anything similar. Not only are the interest rates lower, but if you find yourself unable to repay the funds, you won't be penalized anymore than losing your collateral.
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