Roth/MKM sets $16 target on EZCORP stock with Buy rating

On Monday, Roth/MKM initiated coverage on EZCORP (NASDAQ:EZPW), a leading provider of pawn loans in the United States and Latin America, with a Buy rating and a price target of $16.00. The firm’s analysis highlighted the company’s successful implementation of business model innovations, which have led to increased financial returns across its network of 1,283 storefronts. According to InvestingPro data, EZCORP maintains a "GREAT" financial health score and appears undervalued based on its Fair Value analysis. The company’s P/E ratio of 8.65 suggests an attractive entry point for value investors.

The analyst from Roth/MKM noted that EZCORP’s performance metrics, such as pawn loans outstanding (PLO), revenue, and net revenue per store, have been outperforming its larger competitor, First Cash (NASDAQ: FCFS). The company’s strong performance is reflected in its 8.95% revenue growth and impressive YTD return of 10.07%. Despite these strong indicators, EZCORP is currently trading at a valuation discount compared to its peer, suggesting a potential market undervaluation.

The report further mentioned that EZCORP’s financial returns are significantly driven by its operations in the U.S., which account for approximately 72% of its forecasted FY24 revenue. The company’s presence in Latin America also contributes to its diverse revenue streams and overall financial health.

A key point raised by Roth/MKM was the upcoming maturity of the May 2025 convertible notes. The analyst believes that this event will serve as a near-term catalyst for EZCORP’s stock, as it may remove an existing overhang on the company’s shares.

The positive outlook for EZCORP is rooted in the company’s ability to innovate within its business model. The analyst’s statement underscores the expectation that EZCORP’s strategic initiatives will continue to yield positive results, reinforcing the firm’s decision to initiate coverage with a bullish stance.

In other recent news, EZCORP reported a record quarter with a 7% increase in Q4 sales, surpassing some analyst estimates. The company’s adjusted earnings per share and EBITDA exceeded expectations by 13% and 14%, respectively, driven by a favorable product mix and disciplined expense management. Despite a slight dip in merchandise margins to 34.6%, pawn loans outstanding saw a significant 13% rise to $274.8 million. Canaccord Genuity responded by raising its price target for EZCORP to $22 and maintained a Buy rating, highlighting the company’s robust performance and potential growth from its pending acquisition of Auto Dinero.

In another development, EZCORP announced the appointment of Michael Croney as its new Chief Accounting Officer, effective February 10, 2025. Mr. Croney brings extensive experience from previous roles at Thrive Pet Healthcare and other firms, and his appointment was disclosed in a recent SEC filing. As part of his compensation, he will receive an annual salary of $330,000, along with various incentive bonuses. This executive change is part of EZCORP’s strategy to bolster its leadership team and enhance financial management. Additionally, Robert J. Hicks, the current Chief Accounting Officer, will transition to Deputy Chief Accounting Officer until his departure in February 2025. These recent developments underscore EZCORP’s ongoing efforts to strengthen its operational and financial framework.

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