Pawn shops are profitable business
In a slowing economy you might not think that pawnshops would be the best business to be in, but with huge growth coming from EZCorp, you might think twice about that assumption. First, with a tight economy more people succumb to easy but expensive cash loans from what might as well be known as legal loan sharks. High interest collateralized and non-collateralized loans are proving to be extremely profitable for EZCorp which trades under the ticker symbol EZPW.
Fist of all slow economic times are showing that people turn to pawnshops for cheap things they need at home. Need a monkey wrench, get it from the pawn shop, a new lawnmower goes for $40. You’re getting it for cheap and its still marked up heavily from the person who got the original loan. In many states, Pawn shops can charge interest as high as 30% per year and tack on other fees that can push interest rates as high as 100% per year. That’s a solid business plan right there.
Trading at a multiple of 13 times earnings this stock looks great. Growth rates are very high for this business which looks to turn quick loans into a quick profit. The company is growing at a rate of about 20% per year, giving it a PEG ratio of .67. That’s great for a stock that’s so primed to do well in this economy.
The stock has sold off its highs at $19 per share and has since fallen to $14.46, this is probably the result of large profit taking on a stock that has rallied 56% from June to its top in late July. At these prices though it seems that the stock is a great long term buy as long as the economy performs how it has been performing. The growth potential is unreal for this stock. There’s plenty of support at the $14.25 level, right about where this currently trades. Buy it for tomorrow, buy it for next month, buy it for the decade I think this one is hot.