FirstCash Posts Better Results On Accelerating LatAm Growth

After a disappointing fourt quarter, FirstCash (FCFS) restored some of its growth luster with a better set of first quarter results that included an acceleration of growth in the Latin American store base and improved margins in the U.S. stores. FirstCash remains a solid play on the Mexican consumer and a somewhat countercyclical play on the U.S. economy, though the risk of regulatory changes and new fintech competition shouldn’t be excluded.

At over 14x forward EBITDA, FirstCash shares look more like a solid hold than a clear-cut buy today given where the valuation is. That said, the arrow is moving in the right direction with respect to the underlying momentum in the business, which is why I’m willing to hold on even if discounted cash flow modeling suggests suboptimal returns.

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FirstCash Posts Better Results On Accelerating LatAm Growth

FirstCash Continuing To Make Steady, Value-Creating Progress

Leading pawn store operator FirstCash (FCFS) continues to reap the benefits of a disciplined strategy for building out its fast-growing Latin American operations and simultaneous turning around and integrating the acquired operations of Cash America in the U.S. business. That has not only shown itself in improving underlying financial results but also a higher share price, with the stock more than 70% higher than it was a year ago (versus a 36% rise in its only real publicly-traded comp, EZCORP (EZPW)).

I'm a long-term FirstCash shareholder, but it's hard to argue that FirstCash is significantly undervalued today. A more benign USD/MXN exchange rate could certainly help some, the Cash America stores could start contributing positively more quickly than I expect, and/or the LatAm expansion could be even more successful than I expect, but I think the share price is pretty close to where it ought to be considering the growth potential and the operational risk.

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FirstCash Continuing To Make Steady, Value-Creating Progress

Seeking Alpha: Persistent Sluggishness In The U.S. A Growing Problem For First Cash Financial

It's getting harder and harder to give First Cash Financial (NASDAQ:FCFS) the benefit of the doubt. While the currency issues that are pressuring the reported revenue from the company's large Mexican operations are arguably forgivable, the persistent sluggishness in the U.S. operations is harder to excuse. What's worse, I don't think investors are, or should be, all that happy that the company has committed sizable amounts of capital towards consolidating the slow-growing U.S. pawn market and held off on expanding into faster-growing regions like Colombia and Peru.

Cutting expectations for a stock you've recommended is never fun, and it's even less so when you own the shares yourself. The reality, though, is that First Cash has been a rotten stock over the last year, with the shares down about 30%. While there is still an opportunity for First Cash to generate high single-digit to low double-digit growth in Mexico for years to come and generate better margins from the U.S. operations, this is very much a "show me" story today.

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Persistent Sluggishness In The U.S. A Growing Problem For First Cash Financial

Seeking Alpha: Trying To Assess The EZCORP Black Box

"And if you gaze long enough into an abyss, the abyss will gaze back into you." Friedrich Nietzsche

It has to be some sort of karmic justice that within less than a week of me finally feeling positively inclined toward EZCORP (NASDAQ:EZPW), the company took a significant backward step in terms of corporate governance and shareholder confidence. That was only the start of the trouble, though, as the company has struggled amid a difficult pawn environment in the U.S. and ongoing pressures on the payday lending industry.

The multiple management shakeups at EZCORP haven't done wonders for investor confidence, but I can't argue with the overall direction that the company has laid out for getting itself back onto a better financial trajectory. Unfortunately, investors are still waiting to hear about fiscal second quarter earnings and the results of a review of the Grupo Finmart operations in Mexico - a review that has at least the potential to mark yet another troubled acquisition in EZCORP's history.

Valuation is an exercise in guesswork right now. I can say that low single-digit revenue growth from the FY 2014 starting point and the eventual attainment of double-digit FCF margins can support a fair value of $12 today even with a steep discount rate. Likewise, balance sheet-based metrics that attempt to value EZCORP on the basis of tangible book and/or future returns on equity support a valuation range between $9.50 to $11.

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Trying To Assess The EZCORP Black Box

Seeking Alpha: First Cash Financial - The Battle Between Good Long-Term Potential And Weak Near-Term Momentum

Pawnshop operator First Cash Financial (NASDAQ:FCFS) remains stuck in a relative lull, caught up in foreign currency pressure in Mexico and a challenging operating environment in the U.S. Although margins are holding up better than expected and there are reasons to believe that both the U.S. and Mexican operations can improve as the year goes on, it seems unlikely that this company can generate the sort of headline profit momentum that would get investors interested in the shares.

As a long-term shareholder of First Cash who has seen years of ups and downs, I'm inclined to wait it out. Although I do not expect robust growth in the U.S., I do believe that further regulatory efforts to curb other types of short-term lending will benefit the pawn industry and that First Cash is well placed to benefit from consolidation. I likewise believe that the company still has many years of double-digit growth in Mexico to look forward to, as well as potential expansion into new markets. The long-term potential continues to support a fair value in the high $50s to low $60s, but the company is likely still facing a few trying quarters.

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First Cash Financial - The Battle Between Good Long-Term Potential And Weak Near-Term Momentum

Seeking Alpha: First Cash Continues To Invest For The Long Term

These still aren't the best of times for the pawn/payday lending segment of the specialty lending industry. Gold is setting multiyear lows, limiting jewelry-based pawn lending growth, while Mexico's economic recovery remains slow. First Cash Financial Services (NASDAQ:FCFS) has done alright since my last update, rising more than 2% and beating both the S&P 500 and EZCORP (NASDAQ:EZPW), but lagging Cash America (NYSE:CSH) and not exactly setting the world on fire.

The potential undervaluation here is not necessarily remarkable (in the neighborhood of 10%), but First Cash does appear poised to grow free cash flow at a double-digit rate for many years to come. What's more, management is making use of its cash flow and healthy balance sheet to acquire stores in the U.S. and Mexico at attractive multiples and is likely still considering expansion into additional markets. Weak gold prices and muted retail demand are near-term threats, but I believe First Cash is taking advantage of the present trying times to build its base and position itself for stronger growth down the road.

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First Cash Continues To Invest For The Long Term

Seeking Alpha: First Cash Financial Does Enough To Get By

It remains a good news/bad news situation over at First Cash Financial (NASDAQ:FCFS). The bad news is that the operating environment in both Mexico and the U.S. remains challenging and the company took on significantly higher interest expense to raise cash for expansion. The good news is that the company has aggressively managed its scrapping issues, the U.S. pawn industry remains ripe for consolidation (and maybe growth, too), and Mexico seems to be turning around. I still maintain that First Cash is a better-run pawn operator than EZCORP (NASDAQ:EZPW), which I recently profiled, but I cannot fairly argue that the upside potential today is so commanding as to ignore other players in the space (like EZCORP).

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First Cash Financial Does Enough To Get By

Seeking Alpha: EZCORP Has Been Treading Water While Improving

Eight months ago, I wrote that while EZCORP (NASDAQ:EZPW) had some interesting turnaround potential, I really didn't like the company's operating/ownership structure, nor its operating model. Prior to an announcement in May that I believe is transformative for the company, the shares were tracking down around 5% and the quarterly results were still showing some pressure. While the company is likely to see ongoing pressure in scrapping, comps should start getting easier later in calendar 2014 and the company's valuation is undemanding.

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EZCORP Has Been Treading Water While Improving

Seeking Alpha: Under Fire On All Sides, First Cash Financial Slides Back Toward Value

As I warned the last time I wrote on First Cash Financial Services (FCFS), I thought the stock was expensive and the risk/reward balance wasn't so favorable to new investors. Although I didn't expect First Cash to get hit as hard as it did in the fourth quarter, disappointing results (and an even more disappointed market) have taken a sizable chunk of the excess enthusiasm out of these shares. First Cash still isn't what you might call a screaming bargain, but I believe its one of the best-run companies in consumer finance and I believe the company's long runway of growth in Mexico (and other Latin American countries) and consolidation opportunities in the U.S. make it a stock to consider on this pullback.

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Under Fire On All Sides, First Cash Financial Slides Back Toward Value

Seeking Alpha: It's Not Just Gold That's Troubling EZCORP

This hasn't been the easiest year for pawn and payday lenders not named First Cash Financial (FCFS), and EZCORP (EZPW) has certainly found itself caught in that downdraft, with the shares down more than 40% over the past year. While fellow Seeking Alpha writer Igor Novgorodtsev gave a good rundown on EZCORP's gold scrapping issues, I believe there is more at work here than just the price and profitability of gold scrapping. Not only does EZCORP have a shareholder-unfriendly structure, but the company's losses on consumer loans and market positioning both concern me.

Now, the real question is how much a "concern" is worth. I think First Cash is hands down the better company (and I've owned it for quite a while), but it's hard to see EZCORP get hammered to such a level and not wonder if it has gone past the point where enough's enough. I do worry about EZCORP's fundamental market positioning and the risk to the model from both credit losses and regulatory changes, but even conservative assumptions seem to suggest these shares could hold real turnaround potential.

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It's Not Just Gold That's Troubling EZCORP

Seeking Alpha: First Cash Isn't Cheap, But The Growth Story Is Top-Shelf

Right off the bat, I'm not going to go to any great lengths to defend the valuation at First Cash Financial (FCFS). These shares have outpaced the S&P over the past 12 months and trade at nearly 14 times trailing EBITDA. On the other hand, the company believes it can still grow its Mexican store footprint by 50%, while also taking advantage of high-quality consolidation opportunities in the U.S. Add in the potential to expand to markets like Colombia and Peru and I think you can argue that even though these shares aren't cheap, you are at least getting your money's worth and the company still has the potential to outperform.

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First Cash Isn't Cheap, But The Growth Story Is Top-Shelf

Seeking Alpha: Non-Core Ops Nail First Cash In Q2

First Cash Financial Services (FCFS) has been a solid growth stock for quite some time now, delivering better than 17% annual revenue growth over the past three and ten years and delivering market returns of almost 130% and over 900% over those time periods. But it has also always been a volatile stock as well as a quick look at a long-term chart will show. Some of that volatility can be tied to the economy or the evolving regulatory environment for pawn lending (and to a lesser extent payday lending), but some of it is simply the ups and downs of the business.

Those "ups and downs" came back to bite First Cash this quarter, as significantly lower gold scrapping and a lower peso led the company to lower guidance for the year about 10% a month ago and led to a second quarter financial report that was weak on multiple lines. While the stock has already reclaimed some of the lost ground and remains a promising long-term growth story, I wouldn't encourage new investors to rush into this name at this point.

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Non-Core Ops Nail First Cash In Q2

Seeking Alpha: First Cash Financial Delivers The Growth, But Mind The Valuation

As long-term performers go, I hope to have many more stocks like First Cash Financial (FCFS) before I'm retired as an investor, but I don't expect that I will. Operational excellence and prudent aggressiveness has built this company into a very strong company, and there are still substantial opportunities to grow in the U.S., Mexico, and elsewhere in Latin America. That said, the stock's valuation and slightly lower 2013 expectations may encourage investors to wait before piling into this name.

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First Cash Financial Delivers The Growth, But Mind The Valuation

Seeking Alpha: High Expectations And Uncertain Strategy Could Challenge First Cash Financial

While I'm a happy long-term shareholder of First Cash Financial (FCFS), it is well worth asking what the next year may hold for this generally under-followed and under-known financial services company. Same-store growth has stalled a bit, gold prices are uncertain, and investors continue to look for more definitive guidance about the company's future growth plans. Couple that with a relatively fair valuation, and these shares could appear to some to be liable for some sluggish performance.

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High Expectations And Uncertain Strategy Could Challenge First Cash Financial

Seeking Alpha: Slower Growth May Be A Good Thing For First Cash Financial

It was only a few weeks ago when I wrote that investors ought to consider taking advantage of a pullback in pawn store operator First Cash Financial (NASDAQ: FCFS). Since then, the stock has bounced back to the tune of 15%. Now with fourth quarter earnings in hand, it's a good time to review the thesis and what's going on with this Latin American consumer play.

A Fourth Quarter More Or Less As Expected
First Cash Financial gave analysts revised guidance closely before its official earnings release and so the reported earnings weren't too terribly surprising. Revenue was a little disappointing relative to original expectations, though 15% reported growth and 20% constant currency growth doesn't sound so bad. Unusually for FCFS, revenue growth in the U.S. was stronger than in Mexico. More on this in a minute.

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Slower Growth May Be A Good Thing For First Cash Financial

Seeking Alpha: Another Pullback, Another Opportunity in First Cash Financial

The history of pawn shop operator First Cash Financial (FCFS) has always been marked by pullbacks and retracements, and those have often been good times to reload on what has been an excellent decade-long growth story. Although concerns about the health of the Mexican operating environment and the direction of gold have pulled this stock back from its highs, First Cash remains a high-growth/high-return play with a big international kicker.

A Dose Of Reality To End The Year
Although First Cash had enjoyed a pretty good run for much of 2011, the stock has weakened lately on worries about the health of the company's Mexico operations. Supplying over half of the company's revenue and a lot of the growth, conditions in Mexico have weakened in part due to violence in Northern Mexico, some reduction in loan demand as the economy softens, and lower loan-to-value ratios as the company works to maintain margins and pricing discipline. Making matters a little worse, a weakening peso is a threat to earnings as well.

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Another Pullback, Another Opportunity In First Cash Financial