Even though the general economy has improved over the last few years, unemployment remains high. That means there are millions of people looking for quick and easy access to cash to pay bills and live their lives. That continues to provide a boost to the pawn and payday lending industry, fueling a multi-year cycle of growth and consolidation.
One of my favorite names in the pawn and payday lending space in Cash America, Inc. (CSH), a small capper with a market cap of $1.3 billion. Although shares haven’t exactly been burning up the charts in 2012, that belies the company’s strong earnings growth and compelling valuation.
Valuation
Analysts are looking for full-year 2012 earnings of $4.88. That has CSH trading at 9.43X the full-year consensus. Taking a longer term view, analyst are looking for earnings of $5.67 in 2013, a 17% growth projection. That has shares trading at 8X the 2013 consensus. CSH’s median forward P/E over the last 10 years is 12.8X.
CSH also trades at a discount to the S&P 500’s forward P/E of 13.2X and its industry average of 18.2X. Analysts are also calling for a 5-year growth rate of 15% vs/ the S&P’s 10%.
The Chart
But you don’t see much of this fundamental strength playing out on the chart, with CSH trading right around neutral for the year. Some of that weakness has to do with concern over the regulatory environment, where politicians have short-term lending rates in their cross hairs. But with the long-term trend well in play and a compelling valuation, CSH is one of my favorite stocks out of the pawning and payday lending industry.
1-Year Chart
Michael Vodicka is the president and founder of the Vodicka Group, Inc., a Registered Investment Advisor (RIA). He specialized in trading fixed-income derivatives at the Chicago Board of Trade before spending five years managing equity portfolios for a private investment research company.
Michael graduated from the University of Kansas with a degree in business communications and is registered with the State of Illinois and the SEC (Securities and Exchange Commission) as a Licensed Investment Advisor (Series 65).
