Company overview from Business Week
Cash America International, Inc. engages in the ownership and operation of pawnshops in the United States. It provides pawn loans, short-term cash advances, check cashing services, and other specialty financial services to individuals. The company also sells merchandise in its pawnshops, primarily personal property that has been forfeited in connection with its pawn lending operations. In addition, it offers cash advances and other specialty financial services. Cash America also offers unsecured cash advances through its pawn lending locations; its cash advance locations; and via the Internet distribution channel, www.cashnetusa.com. The company also offers check cashing services and other retail financial services, such as stored value cards, money orders, and money transfers. As of December 31, 2007, the company operated 499 pawnshops, including 485 owned units and 14 unconsolidated franchised units under the brand names Cash America Pawn and SuperPawn in 22 states. It also owned and operated approximately 304 cash advance locations; and 134 franchised and 5 company-owned check cashing centers in 18 states. The company was founded in 1984 and is headquartered in Fort Worth, Texas.(1)
Recent news-Earnings topped estimates,expects a strong Q2(2)
My take
1.Money is hard to come by-pawnshops offer minimum fuss options for people to borrow money without having to produce a ton of documents and it will not affect their credit ratings.
2.Many people pawn gold and the price of gold is going up which is good for the company.
3.No loss making divisions (First Cash has a bleeding auto finance division)
4.Wide distribution over 22 states reducing risk of adverse legislation which would just take the business underground and into the hands of organized crime.
5.Undervalued with respect to industry(3)
6.Recently acquired an online pawn portal which would be important going forward as people look to saving gas by driving less.After all most people are pawning stuff for food and gas money.
Downside
The theme is well known and most of the low lying fruit has been plucked.So there is a chance that one can suffer from volatility.But I am a long term investor and would only average down if I get a better price.If the reader is a trader then this pick may/may not be the one for you.I simply don't know whether the price would go up next week or next month but over the YEARS I expect a good return from the stock.
The other problem is legislation ,being an election year,a lot of politicians will feel the need to "do something".
References
1.Businessweek
http://investing.businessweek.com/research/stocks/snapshot/sn...
2.Reuters news service
http://www.reuters.com/article/marketsNews/idINBNG27706120080...
3.Reuters
http://stocks.us.reuters.com/stocks/ratios.asp?WTmodLOC=C3-Fi...
$38.62 (05/06/08)
