Brian Bober

Cash America: Up 16% on Higher Guidance

The pawn lenders definitely do favor jewelry as collateral. While Cash America hedges, rising gold prices definitely help margins.

Management has stressed focusing on increasing cash flow over revenue growth. Hopefully, this conservative approach and rapid loan portfolio turnover can help keep management focused on earnings not market share. Not having pressure from traders seeking rich annual bonuses should also help.

Cash America: Up 16% on Higher Guidance

Alan,

Thanks for the comment; I have looked at EZPW. I like CSH's online platform because it has higher margins than the storefront operations and the margins should only increase due to low incremental cost.

While it could be argued that the online cash advance product has low switching costs I think the CashNet brand has increasing value and margins should improve as CSH continues to develop its proprietary models for the online platform through experience and incorporating user reputation. Brand and proprietary data are two great ways to build a competitive moat. While CSH competes on price (e.g. interest rates) knowing who to charge how much is the differentiator. Also, I would imagine that the higher quality customers would migrate to the higher quality brand.

I read your article in February and agreed with the premise. Unfortunately, I forgot about EZCorp yesterday when I wrote this article as the stock would have returned me about 15% today (including after hours) due to a nearly equivalent guidance raise; congrats. As you stated succinctly, these companies can adapt quickly to a changing environment because of the high turnover in their loan portfolio. Although, I think CSH is a better long and mid-term option because of its management and online strategy.