Intangible Valuation
Value, contrarian, coat tail rider, idiosyncratic research

Nicholas Financial: Facing Increased Competition From Subprime Auto Loan Originators

Nicholas Financial (NASDAQ:NICK) is a subprime used auto lender. The underlying business and customer base of Nicholas Financial is similar to Consumer Portfolio Services (NASDAQ:CPSS) -- whom I've covered here -- except that it retains the loans it issues whereas CPSS securitizes them.

This strategy appears to have resulted in less earnings volatility. The low interest rate environment, combined with numerous corporate polices, have helped net income increase handily in recent years -- peaking in early 2012 at over $22 million. Earnings have since abated and stand at $19.4 million on a TTM basis.

With the common stock selling in the market at about $194 million, the corporation currently has an earnings yield of around 10%....

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