You need to upgrade your Flash Player
$0.06 (1.02%)
07:44PM (15 mins delay)
Jun 15, 2009 - 12:01 PM EDT
EZCorp (EZPW) cut FY guidance from $1.51 to $1.42 (average) which, still represents 16% - 19% earnings growth YOY. The company cited weakening demand for loans as well as sales of pawned merchandise. Because a customer cannot get a payday loan without a job, the nation’s 9.4% unemployment rate is finally taking a toll on PDLs. And since consumer spending is off, items that might normally have sold from the local pawn shop aren’t moving as quickly. Although these trends are somewhat offset by EZ’s ability to scrap gold at all-time highs, that won’t save the day. The stock tumbled to $10.99, giving it a current p/e of 8. EZ has always been cheap, but it’s outrageously cheap at this price. The market usually recognizes this, as previous drops to this range have not lasted very long. I added to my position last Friday. My stragegy with EZ has been to hold a half-position long, add at attractive prices, and sell calls against half my position at $12.50 or $15.
Cash America (CSH) is still going strong, but has a few challenges. The PDL market is pretty much saturated in this country and they’ve had challenges from the numbnuts in the Ohio legislature that curtailed business over there. Their Q1 conference call explains things in great detail. However, Cash America’s management is top-notch and forward-looking. Their purchase of online lender CashNetUSA was outstanding. That business accounts for some 60% of loan volume and 92% of operating income at this point. They’ve added gold buying and pawn loan services at many Ohio locations. They purchased Mexican lender Prenda Facil, joining other PDLs in the great Mexican PDL Gold Rush. They also just closed on a $100 million senior convertible offering at 5.25% to pay off debt. The company is still a bargain, given earnings growth of 10% based on current estimates of $3.06. The stock price of $22.50 gives it a p/e of 8.5. I think this is another candidate for savvy traders and investors. One of my favorite plays is to take an undervalued stock like this, sell naked puts for a number of shares I wouldn’t mind holding long if they get put to me. The July 22.50 puts, for example, returns a terrific 7% if unexecuted.
Source: Seeking Alpha (Jun 15, 2009 - 12:01 PM EDT)
© 2009 UpDown. All Rights Reserved.
Make a suggestion for this page
Data powered by QuoteMedia (Terms of Use). Data delayed 15 minutes unless otherwise indicated.
