EZCORP(EZPW) Seeking Alpha·2024-08-21 05:48Core Viewpoint - EZCORP (NASDAQ:EZPW) is positioned as a strong investment opportunity amid a weakening economy, particularly benefiting lower-income consumers, with the stock having increased by 45% since November, outperforming the S&P 500 Index which rose by 24% [1][2]. Company Overview - EZCORP is one of the largest pawn brokers in the U.S. and Latin America, operating over 1,200 retail stores across five countries [5][6]. - The primary business model involves extending pawn loans, which are fully collateralized by the merchandise pawned by consumers [6][7]. Financial Performance - In Q3/F24, EZCORP reported a 10% year-over-year revenue increase to 0.25 from 867 million, reflecting an 11% year-over-year growth, while diluted EPS grew 134% year-over-year to 265 million, and pawn service charges increased by 14% year-over-year [10][11]. Market Dynamics - The demand for pawn loans is counter-cyclical, with low-income consumers increasingly relying on these services during economic downturns [7][14]. - Latin America emerged as a standout performer, with pawn loans growing 30% year-over-year due to increased consumer demand and larger average loan sizes [12][13]. Valuation Metrics - Despite a 45% stock price increase, EZCORP remains attractively valued at a forward P/E of 10.6x, below the financial sector's average of 11.5x [14][15]. - Various valuation metrics indicate that EZCORP is trading at significant discounts compared to sector medians, suggesting potential for further upside [15]. Technical Analysis - The stock is in a well-defined uptrend since the COVID lows in 2020, with recent breakouts indicating a potential re-test of all-time highs around $15 per share from 2018 [16]. Conclusion - EZCORP's business model is well-suited for the current macroeconomic environment, making it a compelling buy for investors looking to capitalize on the ongoing cost-of-living crisis affecting low-income consumers [17].