Will a pawnshop earn you more than gold?
Shares of the world's largest pawnshop operator have earned more than twice as much as the S&P 500 this year. The market sees it as a bet on the increasingly cash-strapped consumer. But the accounting shows a different engine - and that engine may already be sputtering.
Key points
Shares of the world's largest pawnshop operator have earned more than twice as much as the S&P 500 index this year.
The company reported a record quarter with revenue of $1.07 billion, but the share price fell after the announcement.
Under the record results, three different engines are running, each with a different lifespan.
Analyst consensus points to $249.75
Management bought back its own shares at $206.73, near all-time highs.
A bank for people banks don't want
FirstCash Holdings $FCFS is something like a bank for people no bank will lend to. You bring a ring, a chain, or a drill, you take away a few hundred dollars, and in a month you either pay a fee and pick the item up, or you leave it in the store and the company sells it. This simple business operates in 3,343 branches in the US, Mexico and other Latin American countries, and since last year in Britain as well. Over the last twelve months it has taken in $4.1 billion in revenue, and its revenue has been growing at an annual rate of 17.6% for a long time.
Yet almost no one has it in their portfolio. A pawnshop is not a cocktail party topic; next to Nvidia or Microsoft it seems a bit embarrassing, and with a beta around 0.55 the stock moves sluggishly. The average investor therefore doesn't look for it at all. That was a mistake this year: the share price has risen about 34% since the start of the year to $213.70, while the S&P 500 index has added roughly 14%. The company's market value has climbed to $9.3 billion.
The question few people ask is: where does that growth really come from? The answer determines whether you hold a stable fee machine or an undisclosed bet on the price of gold.