I always like to know both bull and bear cases on a stock I own. Frankly, the bull case on EZPW is awfully easy to make, up to the low 20-s. I'll make a start on the bear case, but I really can't argue it for below 10. Let's have some more.
1) Identity theft case, of course. Fines aren't that threatening, but the lawyer bills and management distraction could be. 2) Management agreement means cash flow and earnings are subject to the whim of insiders (but their track record has been decent to stockholders) 3) Credit crunch could limit number of good-risk customers while increasing EZPW's overhead.
I'm still scratching at the dirt on this one. How about the perception that this volatile stock is likely to become more volatile in the future (don't ask me why)? That would make a buck of near-term earnings worth less to quantitative types.
I just don't see ANYTHING hiding that outweighs the likelihood that employed people with maxed-out credit cards are going to be flocking to PDL stores for the next year or two. Is there a possibility that the price is influenced by a fear that the employed-but-squeezed population may drop? Maybe by a fear that employment will contract enough to raise the PDL default rate?
"What happens to payday loss ratios as ARMs on subprime mortgages kick in?
What percentage of payday customers have ARMs?"
Part of what I read into Mr Rotunda's comments about raising the creditworthiness requirements on PDL customers was that they were looking at this sort of thing.
Where it might hit home slightly is customers who have promotional rates on home equity lines of credit. They might not raise a red flag on the basis of total indebtedness, and could still be on the edge of trouble.
I have another possible point:
Pawn business is heavily into jewelry, home electronics and power tools. Only jewelry has much scrap value. Resale of forfeited pawn might drop badly in a punk economy. Anyone have data?
i dont know about the amount of payday customers that have ARMs.
in the case of a payday customer going into a BK the loan is less than 30 days old and will be in the super secured creditors and the loan won't receve a cramdown. this is one very good things about the new BK laws and why i like the short term nature of PDLs Vs the longer term instalment loans (over 30 days) don't get this status in a BK filling.