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Tough Times Are Paying At Cash America International
August 16th, 2011
It’s a hard fact that there are businesses that find profit in others’ loss
Tough economic times and a lousy job market are usually not a recipe for business success. However, a leading provider of pawnshops and cash-advance outlets has seen its profit and revenue rise nicely in the last several quarters. Record sales and profits are expected in 2011.
Cash America
Cash America and other companies in this industry are always concerned about the specter of increased regulations on pawnshops and cash-advance businesses. But for investors willing to accept above-average volatility, these shares have appeal. Cash America International offers specialty financial services to consumers, including more than 780 lending operations in 23 states under the names “Cash America Pawn,” “SuperPawn,” “Maxit,” “Pawn X-Change,” “Cash America Payday Advance,” and “Cashland.”
Mr. Payroll
The firm operates another 112 franchised and six company-owned check-cashing centers which are operating in 18 US states under the name “Mr. Payroll.” Cash America also offers consumer loans over the Internet in 30 states, as well as internationally. The combination of high unemployment and a cautious lending environment by banks has fueled big demand for Cash America’s services. Per-share profits rose 27% in the June quarter on a 14% increase in revenue.
Gold
One factor helping results is the price of gold. Articles made from the precious metal are typically used as collateral put up by Cash America’s customers. Thus, the rising price of gold increases the company’s ability to make larger loans on which they earn interest. Higher gold prices also drive higher scrapping revenues, and boost retail revenues. Cash America stock has been quite volatile over the years. The shares dropped from $49 per share in 2008 to under $12 in 2009.
Interest rates
One reason for the volatility is that regulatory moves at the state level to limit fees and interest rates on cash advances and short-term loans can impact margins, and even cause Cash America to shutter operations in those states. Given the increased regulatory mindset in Washington, it is a valid concern for these shares. Cash America has done a good job of addressing these concerns by expanding internationally, especially its e-commerce activities.
Earnings
Analysts expect Cash America to earn $4.27 per share in 2011 and $4.94 per share in 2012. The stock currently trades at 13 times the 2011 consensus earnings estimate, not dirt cheap but reasonable for a stock showing good growth. The issue provides the added kicker as a “gold play.” The stock doesn’t pay much in the way of a dividend yield but these shares should put up decent capital gains over the next 12-24 months.
News for Payday Loan Investors, Lenders and Borrowers
August 5th, 2011
Cash America: A good deal!
With traditional credit remaining tight, the pawn shop operators are filling the void. Cash America International Inc. (CSH – Snapshot Report) recently raised fiscal 2011 earnings guidance after it surprised on the second quarter Zacks Consensus Estimate. This strong buy is also an attractive value stock, with a forward P/E of 12.7.
Financial Services Provider
Cash America provides financial services at 782 locations in 23 states under the names Cash America Pawn, SuperPawn, Maxit, Pawn X-Change, Cash America Payday Advance and Cashland. It is also a majority owner in 184 pawn shops in 21 jurisdictions in central and southern Mexico under the name Prenda Facil. The company offers consumer loans over the Internet in 30 states, the United Kingdom, Canada and Australia.
Second quarter results
Cash America Beat forecasts by 14.1% in the Second Quarter. On July 21, Cash America reported its second quarter results and surprised on the Zacks Consensus by 11 cents. Earnings per share were 89 cents compared to the estimate of 79 cents. The company made just 70 cents in the year ago period. Revenue rose 14% to $334.3 million from $292.1 million in the second quarter of 2010 due to a 15% increase in pawn loan fees and service charges and a 14% increase in merchandise sales. Merchandise sales saw higher gross profit margins, which led to an 18% increase in profit from the disposition of merchandise. Consumer loan fees rose 14% to $132.4 million compared to the prior quarter. The company saw lower losses on consumer loans in the quarter.
Raised Guidance
Given the better-than-expected quarter, and the higher than originally expected balances of lending assets, Cash America raised its full year earnings guidance to a range of $4.28 to $4.48 per share from its April guidance of $4.16 to $4.30.
2011 Zacks Consensus Estimates Rise
Since the earnings report, 7 estimates for fiscal 2011 moved higher pushing the Zacks Consensus up to $4.41 from $4.26 per share. This is earnings growth of 15.1%.
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