Business Editors
NOTE TO EDITORS: The following is an investment opinion issued
by J.M. Dutton & Associates
EL DORADO HILLS, Calif.--(BUSINESS WIRE)--April 18, 2002
J.M. Dutton & Associates initiates research coverage of First Cash Financial Systems (NASDAQ: FCFS -- $9.40) with a Strong Buy recommendation and a 12-month $14.45 price target. The 15-page report by J.M. Dutton senior analyst Richard West, CFA, is available at www.jmdutton.com as well as from Zacks, First Call, Multex, and other leading financial portals.
First Cash Financial Services, Inc., a specialty finance company with a market cap of $82.3 million and shareholders' equity of $74 million, deserves consideration by both value and growth minded investors. EPS of FCFS have grown at a 30+% growth rate since 1994, and are estimated at $1.30 in FY2003 on revenues of $125 million. The Company operates in two areas of consumer short-term financing -- it operates 114 pawn stores, and 109 check cashing and payday advance stores, in eleven states and Mexico. The Company caters primarily to the segment of the population without credit cards or access to traditional bank financing, by meeting their needs for short term liquidity, e.g. check cashing, bill payment or small loans.
FCFS shares are undervalued on an absolute basis, and relative to its three peer companies -- Cash America International (NYSE: PWN), ACE Cash Express, Inc. (Nasdaq: AACE), and EZCORP, Inc. (Nasdaq: EZPW). The Company's shares sell at a relatively low valuation compared to this peer group, reflected by a price earnings ratio on trailing twelve months (Ttm) EPS of 9.5x for FCFS, as compared to 14.7x for PWN, 78.3x for AACE, and a reported loss for EZPW. Of its peer group, based on most recent Ttm results, FCFS has the highest of return on equity (6.83%), the highest return on assets (11.7%), the highest profit margins (7.2%) and operating margins (10%). We conclude: the Company is on the cusp of increased growth in revenues and earnings from internal and acquisition-driven growth. The relatively high return on assets, return on equity, operating margins and profit margins are not being reflected in the current price of the common stock, and we rate it a strong buy.
Richard W. West, CFA, has a range of experience extending over 40 years in securities analysis and investment management. He joined Delaware Management in the early 1970s, and from 1974 to 1983, he was with Brittingham, Inc., where his responsibilities included management of the U.S. portfolio of the Nobel Foundation, one of the premier growth portfolios of its time. He served as research director with Gaines Berland, an investment firm specializing primarily in growth stocks and special situations. He has been independently engaged since 1998 in corporate finance and private research activities. Mr. West is a graduate of the Wharton School, University of Pennsylvania.
About Dutton & Associates
Dutton & Associates is one of the largest independent investment research firms in the U.S. Its 15 senior analysts, primarily CFAs, have expertise in many industries including healthcare, technology, finance, banking, mining, gaming, and energy. Dutton & Associates provides economically bias-free, continuing analyst coverage of enrolled companies, and its institutional-quality research, estimates, and recommendations are carried in all the major databases serving institutions and online investors.
