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EZCORP, Inc. Message Board

  • jagad5 jagad5 Nov 8, 2011 5:58 PM Flag

    My Analysis of EZPW

    I use statistics to analyze reported revenues and then predict future revenues including the effects of seasonality. Next quarter, expect:

    REV - $248M
    NET - $35M
    EPS - $0.69

    Revenue fits my regression model very well (R^2 = 0.98). Using a Ben Graham formula, the current price reflects a growth rate of about 1% per year. I don't see growth decelerating from the 4 year pace of 24% down to that low so it looks to me like the stock is a BUY.

    I only buy stocks selling for less than half my predicted fair value. If the company continues to perform as it consistently has, then the price will go up.

    JMHO
    Jag

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    • The management team is trying to turn pawnshops into a financial services driven entity. That would make me nervous now that they are no longer reporting by segment but instead by geographic location....

      if you look at some of the folks in charge and some of the things they are doing, it looks like the same mistakes and miscues before Rotunda...

      The wheel wasn't broken, what are you fixing ?

    • And I forgot to mention...their investment bamking advisor (a fella named Cohen) oughta have anticipated the problem...

    • I like Ezpw. Revenues are growing about 15% per year. Earnings about 20% per year. PE ratio of 9 based on future earnings projections of $3.05. All good. Gold price are rising providing wind at their back. Same store sales are up excluding payday loan segment. The international growth model (Mexico and Canada stores.) are working. I think the overhang of this new Federal Consumer protection Board is a damper on the stock price, too much uncertainty. Once the air is clear , I think the stock price will go up.

    • EZ Pawn met my revenue forecast and beat on net income and EPS. Updating the analysis, next quarter expect:
      REV: $246
      NET: $36
      EPS: $.73

      R^2 = .99 so the model fits the data almost perfectly. The current price reflects a growth rate of 0%, and it's growing a lot faster than that.

      Still cheap.

      Jag

      • 2 Replies to jagad5
      • EZCorp. beat my estimates again. Next quarter, expect:
        REV: $240
        NET: $34
        EPS: $0.69
        R^2 = .99

        Current price is indicative of a future growth rate of 0%. If you think it will grow faster than that, then you should review whether or not it's undervalued.

        JMHO
        Jag

      • The huge discrepancy between your estimate of fair price and the actual price ought to prompt you to look for explanations. There are several.

        Fee-based loan businesses are under constant threat of changing regulation. When, to take the most egregious example, Texas regulated away the payday loan business, it wasn't instantly clear that it could be replaced, and others found the work-around faster than EZ did. It took a great performance by management to retain a large share of the Texas credit referral business. Such things happen, they can happen suddenly, and it isn't guaranteed that they will work out well.

        Management is relatively inexperienced. We've had one major deal fall through, fortunately without much damage, but it could have been worse (I'm not sure the deal would have been good for owners even if currencies hadn't moved against it). And now they're moving into a business line (long-term loans repaid by payroll deduction) that they are certainly unfamiliar with (I'm not sure anyone knows much about it over a full business cycle).

        The corporate structure is inherently owner-unfriendly, and management has not moved toward mitigating the structural unfriendliness. If anything, the fast-rising management advisory fee is increasing concerns.

        An improving economy and a pervasive anti-regulatory climate may encourage banks to offer new products that compete more directly with offerings from EZCorp, which will be less-regulated because they are novel.

        I hate sounding so bearish all the time. EZPW is one of my largest holdings, but excessively high expectations going in lead to bitterness in the future.

 
EZPW
9.16-0.26(-2.76%)Apr 17 4:00 PMEDT