Hot Stock Tip: Look to Payday Loan Companies
By J.J. CameronPayday Loan Writer
There may be controversy swirling over whether or not a no fax payday loan is helpful for those in debt - but there's no longer debate over how well companies that specialize in this sort of resource do on the stock market.
As Motley Fool Inside Value chief analyst, Philip Durell knows a lot about the industry. His job is to help people choose stocks. With this in mind, Durell focuses on national payday advance lender Advance America as one of his two recommendations last October, noting the controversial nature of the cash loan business as one of the risks inherent in an investment.
However, the company has advanced more than 11% since that time, compared to a 7% increase by the market. Moreover, the whole sector has been one marked for growth since April, rising on average nearly 75% over a six-month period, despite the regulatory hurdles it faces.
Slight payday advance decline. The instant payday loan stock market appears to have gone flat recently, though, rising only a little more than 1%, with Dollar Financial leading the pack. In fact, First Cash HAD been the big loser, falling more than 7% over that time frame. Now, though?
The payday loan company jumped more than 8% on the news that it had bought a car dealership. We reported on this yesterday. Financing vehicle sales to the subprime market is actually a logical extension of the pawnshop/payday advance lending business in which First Cash excels.
Also, with the FDIC and various states clamping down on certain aspects of the faxless payday loan lending, the car dealerships are seen as a necessary diversification. First Cash plans on opening another three to five dealerships by the end of 2007.
Even in the challenging economic climate in which payday loan providers find themselves, they are still seeing profit potential rise. First Cash noted in its Auto Master acquisition that it should be able to garner a larger share of the market through better-coordinated advertising and inventory selection. It believes the acquisition will increase earnings in the fourth quarter.
Now, EZ Corp has also raised guidance to $1.90 per share as its third-quarter revenues, which ended June 30, rose 31% over last year. Cash America, another cash advance lender, said profits in its second quarter (which also ended in June) increased 58% from a year ago.
