Stock Analysis & Ideas

Is EZCorp a Good Investment?

EZCorp (EZPW) is a leading provider of pawn loans in Canada and Mexico. The company was the second-largest pawn shop operator in the United States. It also sells merchandise, primarily pre-owned merchandise from customers and collateral forfeited from lending operations. EZCorp also operates Lana, a web-based platform that manages pawn loans.

I am neutral on EZCorp because the rich valuation multiples and weak Wall Street coverage offset the significant upside potential implied in its price target and the significant economies of scale enjoyed by the company. (See Analysts’ Top Stocks on TipRanks)


As of September 30, 2020, the company operated 505 pawn shops in the U.S., 368 shops in Mexico, and 132 pawn shops in Peru, El Salvador, Honduras, and Guatemala, giving it significant scale and brand recognition.

During the third quarter of 2021, the company made its largest acquisition by buying off 128 Cash ApoyoEfectivo stores in Mexico. It also acquired 11 stores in Houston and four de novo stores in Latin American, equating to a total count of 1,143 stores, 55% of which are located in Latin America. These transactions further strengthened its economies of scale and network advantages.

Recent Results

The third quarter of 2021 saw a solid performance from EZCorp, which continued to make significant strides in growing its pawn business across North America. The company posted revenues of $174 million, beating consensus estimates by 0.55%. This is compared to the $210.2 million of revenue generated in the third quarter of 2020.

The company also reported a quarterly adjusted loss of $0.03 per share in comparison to the $0.01 loss per share during the third quarter of 2020.

Furthermore, net income showed an improvement to a loss of $2.6 million from a previous loss of $5.5 million, and adjusted EBITDA more than doubled, reflecting improvements in core operating metrics and a commitment to expense management.

The company expects to realize annualized cost savings of over $14 million for Fiscal Year 2021, even after higher store-level expenses from increasing transaction volumes.

Valuation Metrics

EZCorp’s stock looks a bit richly priced at the moment, with an EV/EBITDA ratio of 11x compared to its 5-year average of 8.5x. Furthermore, its price-to-forward normalized earnings ratio is 20x, compared to its 5-year average of 16.4x (see EZPW stock charts on TipRanks).

Wall Street’s Take

Turning to Wall Street, EZCorp earns a Moderate Buy consensus rating, based on one Buy assigned in the past three months. Additionally, the average EZCorp price target of $12 implies 53.9% upside potential.

Summary and Conclusion

EZCorp operates in a recession-resistant industry while enjoying significant scale and geographic diversification. The company also has a strong online presence, which is essential in the current economy that is becoming increasingly internet-centric. Furthermore, the Wall Street analyst that covers it is bullish, and the upside potential as per the price target is quite significant.

That said, the company is currently trading on the high end of its historical valuation range and is only followed by one analyst. Therefore, it is difficult to put too much weight on its Wall Street consensus rating and price target. As a result, it might behoove investors to wait for a pullback in the share price before adding shares.

Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.

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