Notes

EZCORP, Inc. (EZPW) is primarily a lender or provider of credit services to individuals who do not have cash resources or access to credit to meet their short-term cash needs. During the fiscal year ended September 30, 2006 (fiscal 2006), the Company offered non-recourse loans collateralized by tangible personal property, commonly known as pawn loans in 280 EZPAWN locations. At these locations, the Company also sells merchandise, primarily collateral forfeited from its pawn lending operations. In fiscal 2006, the Company offered short-term, non-collateralized loans, payday loans, or fee-based credit services to customers seeking loans (collectively, signature loans) in 334 EZMONEY stores and 82 EZPAWN stores.

The publicly traded shares (EZPW) have no voting rights.

3JUL07 $12.52

Market cap: $517 million

EZPW beats the averages for the S&P 500 in almost every financial category:

P/E Ratio (TTM) 15.65
Price to Sales (TTM) 1.52
Price to Book (MRQ) 2.66 (all tangible)
Price to Cash Flow (TTM) 11.88
Price to Free Cash Flow (TTM) 14.48

The current ratio and quick ratio are over 5, and there is no long-term debt.

The numbers for efficiency (returns, profit margins, etc.) are more mundane, but still acceptable.

The 5-year and 1-year PEGs are 0.8.

Small amount of insider buying mixed with selling.

Estimates:
Sales, 2008: 15%
Earnings. Next qtr: 25%; next year: 22%; next 5-years: 19%

Quarterly Report
"In September 2006, the Compensation Committee of our Board of Directors approved an award of 675,000 shares of restricted stock to our Chairman of the Board, and 945,000 shares of restricted stock to our Chief Executive Officer. The award was effective October 2, 2006. The cumulative market value of the two grants on the award date was $21 million, and 20% of the shares will vest every two years for a ten-year period if certain company performance requirements are achieved."

Thoughts: The stock has lost about 15% in the last month, apparently because of 1) a perceived threat from Walmart's MoneyCenters, and 2) a lawsuit from Texas for throwing customer identity information in the trash, instead of shredding it. But. The latter is a one-time event, now settled. Walmart isn't currently offering loans.

If you think we're headed for a recession, pawn shops are a good investment! Not many companies can be so indifferent to average income levels. The ratios of the current price to future estimated growth are very good, so EZPW may be a good investment even if the economy stays solid. It looks like a solid, safe (for a small company) investment. The lack of voting rights is a concern, and may keep the shares at lower valuations than its peers.

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