Lending to consumers outside the mainstream continues to be profitable for Advance America, Cash Advance Centers, Inc. (AEA). It recently surprised on the Zacks Consensus for the third quarter in a row. Despite trading near multi-year highs, this Zacks #1 Rank (strong buy) is still a value stock with a forward P/E of just 9.4.
Advance America provides non-bank cash advances at 2600 centers and 52 limited licensees in 29 states, the UK and Canada to consumers who otherwise would not be able to get credit at traditional banking institutions.
Advance America Beat by 14.3% in the Third Quarter
On Oct 26, Advance America reported its third quarter results and surprised by 3 cents per share. Earnings per share were 24 cents compared to the consensus of 21 cents. The company made just 2 cents in the year ago period.
Revenue rose to $443.6 million from $440 million a year ago despite regulatory changes in Colorado, Illinois, Virginia, Washington and Wisconsin which cut revenue to $11 million from $17.3 million last year. If those 5 states are excluded, total revenue actually rose 8% year over year.
The company closed or consolidated 51 centers in 9 states, including 30 centers in Washington where its operating results were negatively impacted by a new law that went into affect in January 2010. It also opened 7 centers.
Advance America also completed the acquisition of the assets of CompuCredit's retail storefront consumer finance business which had been announced previously. It was the most significant acquisition by the company in the last 10 years.
The deal consisted of about 300 centers in Alabama, Colorado, Kentucky, Ohio, Oklahoma, Mississippi, South Carolina, Tennessee and Wisconsin.
Zacks Consensus Estimates Rise
Advance America is expected to post double digit earnings growth both in 2011 and 2012. The 2011 Zacks Consensus jumped to 95 cents from 93 cents 60 days ago.
This is EPS growth of 23.4%.
Similarly, the 2012 Zacks Consensus Estimate rose to $1.17 from $1.06, also in the last 2 months. This is EPS growth of 23.5%.
Value AND Shares at Multi-Year Highs
It's possible to be a hot stock and also be a value. Advance America has recently again been testing the multi-year high.
Still, there is plenty of value left in the shares. In addition to a forward P/E under 10, it also has a price-to-book ratio of 2.1. A P/B under 3.0 usually indicates "value."
Advance America also has an attractive price-to-sales ratio of 0.9. A P/S under 1.0 can indicate a company is undervalued.
Shareholders also benefit from a dividend, with an attractive yield of 2.8%. Advance America has paid a dividend for 28 consecutive quarters.
With traditional credit still hard to come by, Advance America continues to step into the void.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at traceyryniec.