FirstCash Undervalued Amid Exceptional Operational Uncertainty

I’m not sure who said it, but I’ve long loved the quote, “History doesn’t repeat itself, but it often rhymes” (the quote is often attributed to Samuel Clemens, but it’s disputed). No two recessions are ever the same, and while recessions are often relatively good opportunities for pawn shop operator FirstCash (FCFS), this Covid-19 outbreak and the ways governments are responding to it are creating some new challenges.

I don’t expect 2020 to be a good year for FirstCash; I wasn’t expecting that before, and I’m expecting a worse outcome now. I do think that business will improve in 2021, though, as elevated levels of unemployment and tighter consumer credit will play to the company’s strengths. FirstCash’s leverage, currency risk, and general business risk make this a more challenging name, but I believe the discount to fair value is too wide now.

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FirstCash Undervalued Amid Exceptional Operational Uncertainty