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FCFS

FirstCash Holdings NasdaqGS:FCFS Stock Report

Last Price

US$73.35

Market Cap

US$3.4b

7D

-5.7%

1Y

-16.6%

Updated

30 Sep, 2022

Data

Company Financials +
FCFS fundamental analysis
Snowflake Score
Valuation1/6
Future Growth4/6
Past Performance3/6
Financial Health3/6
Dividends3/6

FCFS Stock Overview

FirstCash Holdings, Inc, together with its subsidiaries, operates retail pawn stores in the United States, Mexico, and rest of Latin America.

FirstCash Holdings, Inc Competitors

Price History & Performance

Summary of all time highs, changes and price drops for FirstCash Holdings
Historical stock prices
Current Share PriceUS$73.35
52 Week HighUS$97.04
52 Week LowUS$58.30
Beta0.68
1 Month Change-5.91%
3 Month Change4.64%
1 Year Change-16.63%
3 Year Change-18.06%
5 Year Change18.88%
Change since IPO2,883.73%

Recent News & Updates

Sep 16

FirstCash Holdings: Counter-Cyclical Pawn Business

Summary FirstCash Holdings, Inc. is a leading operator of pawn stores in the U.S. and Latin America. The pawn business is highly counter-cyclical and typically expands in tough economic environments. FirstCash recently acquired a POS payment business that offers Lease-To-Own loans in over 7,600 retail locations. LTO loans are cyclical and may expose FirstCash Holdings to loan losses. For now, I think the pawn business tailwinds outweigh the potential headwinds from the LTO loans. FirstCash Holdings, Inc. (FCFS) has a core pawn business that is counter-cyclical and can potentially benefit from the current economic slowdown. However, investors need to be mindful that the company recently acquired America First Finance business, which provides retail Lease-To-Own ("LTO") loans. This is very cyclical and can expose FCFS to credit losses in a bad economic environment. I think, for now, the countercyclical tailwinds of the pawn business outweigh the risks from the payments business, and FirstCash is worth a speculative buy. Company Overview FirstCash Holdings, Inc. is a leading operator of pawn stores in the U.S. and Latin America, with over 2,800 retail locations. It also operates in the retail point-of-sale ("POS") payment solutions business that provides credit-constrained consumers with LTO loans. Approximately 80% of FCFS's earnings come from the pawn segment, and 20% come from the newly acquired POS Payments business (Figure 1). Figure 1 - FCFS overview (FCFS investor presentation) Pawn Is A Counter-Cyclical Business Pawn stores are local retail stores that buy and sell pre-owned consumer products like jewelry, electronics, tools, and sporting goods. Pawn stores provide a quick and convenient source of small ticket, secured, non-recourse loans to unbanked/underbanked/credit constrained consumers. A typical customer enters the pawn store with their personal asset and about a quarter of the time, they sell the item directly to the store. Three-quarters of the time, they get a pawn loan, collateralized with their asset. Of the items pawned, about three-quarters are repaid, and the pawn store earns 12-13% monthly yields. A quarter of pawn loans default, and the pawn store takes possession of the asset. Assets that the pawn store takes possession of (either through direct purchase or defaulted loans) are resold to consumers at a 35-45% margin. Figure 2 shows an overview of the Pawn business. Figure 2 - Pawn business overview (FCFS investor presentation) Historically, the pawn business has performed well across most economic cycles. In particular, the pawn business is countercyclical, as financially stretched consumers tend to utilize pawn services more during tough economic conditions. U.S. FirstCash Holdings stores actually saw a 50% increase in pawn receivables from 2007 to 2012 during the "Great Financial Crisis" ("GFC"), and receivables declined during COVID, as financially stretched consumers were buoyed by government stimulus cheques (Figure 3). Figure 3 - Pawn business is counter-cyclical (FCFS investor presentation) As government stimulus has ended and inflation eats into stretched household budgets, we can expect pawn store utilization to increase in the coming quarters. Already, we see U.S. pawn store receivables up 27% YoY as of July 31st (Figure 4). Figure 4 - FCFS U.S. pawn store statistics (FCFS investor presentation) Financials Financially, the pawn business model generates high returns. Unlike payday lending, which is banned in 12 states and has 36% interest rate caps in 18 other states, FirstCash's pawn loans do not fall under those regulations. This has allowed FCFS to earn total returns of over 160% of earning assets in the last twelve months in its U.S. pawn segment (Figure 5). The rate of return in the Latin America segment is even higher at 190%. Figure 5 - FCFS U.S. pawn returns (FCFS investor presentation) On a consolidated basis, this has translated into trailing twelve-month revenues of $2.2 billion, and $4.64 in adjusted EPS (Figure 6). Figure 6 - FCFS consolidated financial results (FCFS investor presentation) Note, while the pawn business generates fantastic cash returns, it does require a lot of operating expenses to maintain. After deducting operating expenses like employee compensation and occupancy costs, FirstCash has an LTM adj. net margin of 9.2%. Valuation Is Rich FirstCash is currently trading at an Fwd P/E of 17.3x, which is high, relative to the financial sector's 10.5x Fwd P/E (Figure 7). However, we need to understand that FCFS's business is counter-cyclical, so while investors may be wary of credit losses and thus awarding a lower multiple to banks and alternative lenders, FirstCash's pawn business actually benefits from a weakening economy as its pawn loan receivables grow during tough times. Figure 7 - FCFS valuation (Seeking Alpha) Importantly, even during the COVID pandemic, FirstCash had negligible loan losses, as FCFS typically lends only a fraction of an asset's collateralized fair value (Figure 8). Figure 8 - FCFS negligible pawn loan losses (FCFS 2021 10-K) LTO Loans - Opportunity & Risk While FirstCash's core pawn business looks to benefit from tougher economic conditions, the recently acquired POS payments business does raise some questions and concerns. In December 2017, FirstCash paid $1.17 billion (8 million shares plus $400 million cash) to acquire America First Finance ("AFF"), a rapidly growing retail Lease-To-Own finance provider. AFF's payment solutions is available in over 7,600 retail merchant locations. Similar to the increasingly popular BNPL business model, AFF's POS payment solutions business allows consumers to apply for credit at the cash register. If credit is granted, they can take the items home and pay for the purchase over time through automated installment payments (Figure 9). Figure 9 - FCFS LTO finance overview (FCFS investor presentation) On the positive side, the LTO finance business is somewhat complementary to the core pawn business. It essentially targets the same consumer demographic (underbanked, credit constrained), and captures transactions where this consumer purchases new assets at other retail merchants. It is also much easier to grow the earning asset base, as the lever to toggle would be lending standards (one of the knocks against FCFS in the past had been its lack of growth during good economic times). However, there are subtle and critical differences between the LTO and pawn businesses. First, recall that in a typical pawn loan transaction, the customer brings the pawn asset to the store, and the store keeps possession of the asset as collateral during the loan period. The loan is typically made at a fraction of the market value, so the pawn store is relatively protected from credit losses: in the worst case, the store takes ownership and sells the item.

Aug 31

FirstCash Holdings increases size, extends maturity date of credit facility

Retail pawn stores company FirstCash Holdings (NASDAQ:FCFS) has amended the terms of its long-term, unsecured bank credit facility. The size of the credit facility has been increased to $590M from $500M, and the maturity date has been extended to August 2027 from December 2024. The facility has an uncommitted accordion feature that allows for an additional $200M of potential borrowing capacity. The credit facility is provided by a group of eleven commercial banks. Additionally, the amended facility is expected to further support the ongoing shareholder payouts through cash dividends and share repurchases. Source: Press Release

Aug 10
FirstCash Holdings (NASDAQ:FCFS) Is Increasing Its Dividend To $0.33

FirstCash Holdings (NASDAQ:FCFS) Is Increasing Its Dividend To $0.33

The board of FirstCash Holdings, Inc ( NASDAQ:FCFS ) has announced that it will be paying its dividend of $0.33 on the...

Aug 08

FirstCash Seeing A Strong Core Pawn Recovery, But Point-Of-Sale Is Lagging

FirstCash reported somewhat mixed Q2 results, as strong results in the pawn business are being offset by weaker results in the recently-acquired AFF point-of-sale/lease-to-own financing business. Higher inflation is driving increased demand for pawn loans, with the Latin American operations continuing to lag the U.S. operations but still improving. Point of sale financing is being hurt by weaker foot traffic at partner locations, but AFF continues to add new retail partners. I see some near-term sentiment risk from the AFF operations, but I believe FirstCash is still likely to generate high single-digit long-term core growth, and that the shares are undervalued. It took some time, but FirstCash (FCFS) is definitely seeing a recovery in its core pawn operations, as high inflation is pinching disposable income for its core customer base. At the same time, though, retail partners for the company's lease-to-own operations (the American First Finance acquisition) are seeing lower foot traffic and gross origination volumes haven't impressed me all that much so far. At this point, I remain concerned that the AFF deal will drag on results in the near future, though I do still see the logic of entering the point-of-sale financing/lease-to-own business with an asset-light model. I also still expect some lag in the performance of the Mexican pawn stores relative to the U.S. operations, and I continue to believe that expanding the Latin American store footprint would be a good use of capital. Between a better outlook for the core pawn operations and a weaker outlook for the POS/LTO operations, my model and valuation don't change all that much. I continue to believe that FirstCash shares are undervalued and worth considering, but I also acknowledge that the AFF acquisition has added execution/capital allocation risk to the story, and some investors may prefer other plays on themes like inflation and lower-income consumers. The Ongoing Pawn Recovery Is Evident In The Q2'22 Results While overall second quarter results at FirstCash were as expected on the top line (and better by $0.10 on the EPS line), there was a divide between the business segments - the pawn business did better than expected, while the point-of-sale business didn't meet expectations. Revenue rose 63% as reported, or 69% on an adjusted basis, with organic revenue growth of around 17%. Retail merchandise sales revenue rose 12% year over year (or 10% in same-store terms), while pawn fee revenue rose 22% (20% same-store). Scrap revenue jumped 69%, while AFF revenue was down slightly sequentially as slightly higher interest and fee income was offset by weaker leased merchandise revenue. Core U.S. pawn operation revenue rose 21%, with core pawn revenue (ex-scrap) up 18% on 13% growth in merch sales (up 10% same-store) and 31% growth in pawn fee revenue (up 29% same-store). Scrap revenue more than doubled (up 129%). In the Latin American operations, revenue rose 10% in constant currency, with retail sales up 11% (up 11% same-store) and fees up 8% (7% same-store). Scrap sales rose 13%. Gross margin was weaker, falling 11 points to 46.5% from the year-ago level, due both to the inclusion of lower-margin AFF revenue and some changes in the underlying pawn business mix. Both the U.S. and LatAm pawn operations saw lower gross margin (down 180bp to 57.3% and down 30bp to 54.6%, respectively), largely due to the higher contribution of low-margin scrap jewelry revenue. EBITDA rose 167% as reported, or 68% in adjusted terms, with core pre-tax pawn income up 29%, with a margin of around 21%. AFF pre-tax earnings more than doubled sequentially, with a margin of around 6% on a GAAP basis. Better Days For Pawn Lending, And This Could Last A While As I outlined in my last piece on FirstCash, I expected pawn lending to improve as 2022 developed, and that has been the case. The drivers I previously mentioned - inflation, the end of stimulus payments, and a change in taxes - have all contributed to increased pressure on lower-income households, leading to increased demand for pawn loans. As has been the case for some time, the LatAm recovery is lagging the U.S. recovery, some of which is due to a weaker economic recovery in Mexico and some of which I believe is due to higher remittances from the U.S. Pawn loans grew 33% in the U.S. (reported and same-store), while the Latin American operations saw 6% growth on a constant currency same-store basis. Those numbers represent modest deceleration in the U.S. (from 38% growth in Q1'22) and modest acceleration in LatAm (from 3% growth) but point to healthy upcoming growth in pawn lending fees as loans are rolled over. In both cases, pawn loans are now above pre-pandemic levels. There have been some ups and downs in the merchandise operations as the pandemic disrupted the business, but I believe the business is overall in good shape. Merchandise sales growth did decelerate in Latin America (and accelerated in the U.S.) relative to the first quarter, but in both cases retail margins are healthy and inventory is in good shape. Even with a recent retreat in gasoline prices, I do expect healthy pawn loan demand at least into 2023. I'm a little less certain about the merchandise operations - I think demand will be okay, but I believe management could have some challenges in their direct buy operations as customers run out of items to sell (though surrenders from pawn lending will likely increase). To be clear, I don't think the merchandise operations will suddenly underperform, but rather I think this level may be harder to maintain if it's harder to grow inventories. More Challenges In The POS/LTO Market Today There were some positive notes on the AFF business in the second quarter - active merchant locations rose 34% yoy and 10% qoq (to 7,600), and combined receivables rose 21%. On the other hand, AFF's retail partners did see weaker foot traffic, and gross transaction volume was up only 5% in the quarter. Underlining some of the pressure, management noted in the release that they now expect the contingent compensation payout for the AFF deal to be on the lower end of the range, as the businesses' EBITDA is unlikely to hit the targets for the higher end of the range. As a reminder, AFF owners could have received $300M in earn-outs ($250M and $50M) tied to the business achieving $153M in '22 EBITDA and $239M in '23 EBITDA. What's going on with AFF does not seem to be a unique phenomenon in the space. PROG Holdings (PRG) pre-announced weaker Q2 results, and when reporting those results, did note weaker demand trends and higher delinquency rates. Rent-A-Center (RCII) (AFF competes with RCII's Acima business) performed better than PROG and management seemed less concerned about delinquency rates but did also note weaker foot traffic at retail LTO partners. I don't think anything is "broken" here. Rather, I do think this is a response to current trends like high inflation pressuring disposable income and leading consumers to be a little more conservative on their spending. Longer term, I see good growth potential in point-of-sale financing (particularly in end-markets like repair services), but I do also still have concerns about the influx of capital and competition into the market.

Shareholder Returns

FCFSUS Consumer FinanceUS Market
7D-5.7%-4.2%-2.5%
1Y-16.6%-40.3%-23.2%

Return vs Industry: FCFS exceeded the US Consumer Finance industry which returned -38% over the past year.

Return vs Market: FCFS exceeded the US Market which returned -21.5% over the past year.

Price Volatility

Is FCFS's price volatile compared to industry and market?
FCFS volatility
FCFS Average Weekly Movement5.2%
Consumer Finance Industry Average Movement7.7%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: FCFS is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: FCFS's weekly volatility (5%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
198817,000Rick Wesselhttps://firstcash.com

FirstCash Holdings, Inc, together with its subsidiaries, operates retail pawn stores in the United States, Mexico, and rest of Latin America. Its pawn stores lend money on the collateral of pledged personal property, including jewelry, electronics, tools, appliances, sporting goods, and musical instruments; and retails merchandise acquired through collateral forfeitures on forfeited pawn loans and over-the-counter purchases of merchandise directly from customers. The company is also involved in melting scrap jewelry, as well as sells gold, silver, and diamonds in commodity markets.

FirstCash Holdings, Inc Fundamentals Summary

How do FirstCash Holdings's earnings and revenue compare to its market cap?
FCFS fundamental statistics
Market CapUS$3.43b
Earnings (TTM)US$176.88m
Revenue (TTM)US$2.21b

19.4x

P/E Ratio

1.6x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
FCFS income statement (TTM)
RevenueUS$2.21b
Cost of RevenueUS$966.27m
Gross ProfitUS$1.24b
Other ExpensesUS$1.07b
EarningsUS$176.88m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 27, 2022

Earnings per share (EPS)3.78
Gross Margin56.26%
Net Profit Margin8.01%
Debt/Equity Ratio72.0%

How did FCFS perform over the long term?

See historical performance and comparison

Dividends

1.8%

Current Dividend Yield

30%

Payout Ratio