EZCORP, Inc. (EZPW - Snapshot Report) is riding high as the pawnshop business booms during the economic slowdown. The company recently acquired an additional 67 pawnshops to expand its reach in Florida. EZPW is trading at 10.18x forward earnings.

Company Description

EZCORP operates payday-lending stores and pawnshops in the U.S. and Mexico for individuals who do not have cash or access to credit. As of Dec 31, 2008, the company operated 890 locations, including 412 pawnshops, with 371 in the U.S. and 41 in Mexico, and 478 loan stores exclusively in the U.S.

On Jan 2, the company announced that it had completed its previously announced acquisition of Value Financial Services, Inc. which operated 67 pawnshops in Florida, Tennessee, Georgia and Mexico, with 59 of the 67 shops located in Florida.

The company expects the acquisition to be accretive to its fiscal 2009 earnings of approximately 8 to 9 cents per share.

EZCORP also closed on a $120 million credit facility, consisting of a $40 million term loan and an $80 million revolving line of credit. As of the closing, the company only borrowed $40 million, leaving $80 million of the credit line available for future use.

Revenue Jumped 23% in Fiscal 2008

On Nov 6, EZCORP announced fourth-quarter and 2008 full-year earnings that met Wall Street estimates. For the fourth quarter, net income rose 44% to $16 million from $11 million in the year ago period.

Revenue grew 19% to $123 million. The pawn operations were the engine of growth in the quarter. It was the 25th consecutive quarter of year-over-year earnings growth.

Fiscal 2008 net income climbed 38% to $52.43 million, or $1.21 per share, from $37.87 million, or 88 cents per share, for the 2007 period. Revenue rose 23% to $457 million.

First-Quarter and Full-Year 2009 Guidance

EZCORP issued first quarter 2009 and full-year earnings forecast of 35 cents and $1.45 per share, respectively. The company is scheduled to report first-quarter earnings on Jan 22.

Consensus Estimates Rise for 2009

Given the company's guidance, first quarter estimates have been holding steady at 35 cents the last 60 days.

Full-year 2009 estimates, however, have risen 5 cents to $1.50 over the same period, which is higher than the company's guidance. Analysts expect 2009 year-over-year earnings growth of 25.84%.

One possible hidden danger to 2009 earnings is the possibility that the incoming Obama Administration may regulate payday loans and limit interest rates, both which would impact EZCORP's bottom line.

Value Fundamentals

EZCORP is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 2 out of the last 4 quarters by an average of 3.51%.

EZPW is trading at 10.18x forward earnings. It has a price-to-book of 1.92. The company has an outstanding 5-year return on equity (ROE) of 15.03%.