EZCORP (EZPW) delivered a strong finish to fiscal 2023. Indeed, total revenues for Q4 climbed 15.9% year-over-year to $270.5 million and exceeded the consensus forecast by $7.5 million (or 3%) as a 17.0% jump in the level of pawn loans outstanding (PLO) compared to Q4 of fiscal 2022 drove an 18.7% surge in pawn services charges (PSC) to $104.3 million and the company saw merchandise and jewelry scrapping sales increase 13.4% and 21.7% to $151.2 million and $14.9 million, respectively. And with gross margins on this sold merchandise of 36% remaining within its targeted 35-38% range thanks to EZPW’s efforts to reduce low-value aged inventory by 30 basis points sequentially to just 1.3% of the total, adjusted earnings soared 53.3% to 23 cents per share, which surpassed the 15 cents analysts had been projecting by an even wider margin of 35%.
What’s more, with inflationary pressures, increasing interest rates, high gas prices and the tightening of credit from alternative lenders boosting the demand for pawn from customers looking to satisfy their short-term cash needs, EZPW grew its PLO balance by another 7.1% sequentially from $229.4 million at the end of Q3 to a record $245.8 million. Yet despite the incremental cash required to support these loans, as well as the rise in its merchandise inventory, which collectively totaled $27.9 million in the period, the company’s net debt balance only grew by $18.0 million sequentially and it was able to end the quarter with a hefty unrestricted cash balance of $220.6 million thanks to the strong cash flow produced by its operations.
EZCORP (EZPW) is one of the stocks recommended in our market-beating investment newsletter, Forbes Investor. To find more beaten down, undervalued stocks with significant upside like EZPW, try Forbes Investor here.
Furthermore, EZPW bought 21 additional stores in Q4. Two of these were acquired in the U.S., while the ten it opened in Mexico, seven in Guatemala and two in Honduras helped it further expand its presence in the Latin American market. That also continues to bode well for EZPW’s points-based EZ+ Rewards program, which is designed to incentivize customers to transact more, continues to grow across all of its regions, and saw its number of enrolled customers rise by a further 15.1% over the previous quarter to 3.8 million. Given that this sets the company up for continued strong operating and cash flow performance in the periods ahead, I’m baffled by investors’ negative response to this report today and believe that those who keep their patience will ultimately be well rewarded.
Julius Juenemann, CFA is the equity analyst and associate editor of the Forbes Special Situation Survey and Forbes Investor investment newsletters. EZCORP (EZPW) is a current recommendation in the Forbes Investor. To access this and the other stocks being recommended through the Forbes Investor, click here to subscribe.