This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

May 28, 2009 - EZCORP, Inc. (EZPW-NASDAQ) together with its subsidiaries, lends or provides credit services to individuals to meet their short-term cash needs. The company makes pawn loans, which are non-recourse loans collateralized by tangible personal property, including jewelry, consumer electronics, tools, sporting goods, and musical instruments.

As of September 30, 2008, it offered pawn loans in 294 United States pawn stores and 38 Mexico pawn stores, as well as signature loans from 71 pawn stores and 477 EZMONEY stores. The company was founded in 1989 and is based in Austin, Texas.

With the economy hurting, pawn shops are thriving. Revenues at EZCORP went from $315.9 million in 2005 to $457.4 million in 2008. This year analysts predict $607.2 million, then $668.24 million next year.

Profits are also doing extremely well. For the last 5 years, the average annual earnings increase was 59%. In 2006, they were 69 cents a share, then went to 88 cents. In 2008 they jumped to $1.21. This year analysts see $1.51, then $1.77 in 2010. Second quarter earnings were recently released (fiscal year ends in September), up 23% above the same quarter last year, 37 cents vs 30 cents. For the third quarter, analysts expect 34 cents compared to 25 cents last year. For the final quarter look for 46 cents per share, well above the 37 cents made last year in the last period. Earnings for the most recent quarter were bolstered by increased pawn activity as well as acquisitions.

With a weak U.S. economy and shrinking credit availability, consumers find it tough to get loans from banks or other financial institutions. That plays to EZCORP's strengths of pawn loans and payday loans. At the end of the March quarter, the company showed an increase in pawn loans of 40% compared to March quarter of last year. Part of that improvement came from the purchase of 11 Pawn Plus shops in Las Vegas and 67 Value Pawn stores in Florida. Florida is one of the hardest hit states by a weak housing market which makes EZCORP's services in strong demand for the foreseeable future.

The company is already in Mexico but plans to expand. The same is true for Canada. Both countries share the economic straits afflicting the U.S. Both should contribute meaningfully to profits for the next several years.

Cash is plentiful at EZCORP, partly because it recently added some debt. Still debt is only 7% of the balance sheet. There's $55 million in cash and $94 million in pawn loans with $56 million in for-sale inventory. All told, current assets are $247 million while current liabilities are $45 million. That puts the current ratio at more than 5.5. With a strong balance sheet, the company can easily fund its expansion plans.

More numbers: Price to Book is 1.52. Price to sales is 1.11. Operating margin for the last 12 months was 16.5% while Profit margin was 11.62%. Return on Equity was a remarkable 19.34%. Book Value is $7.75. 52-week high was $19.25, attained on September 30, 2008. 52-week low was $9.50, hit on March 2, 2009. There are 48.6 million shares outstanding and a float of 47.22 million. Insiders own 2.12% of the stock. Institutions have 84.4%. There is no dividend.

Look closer at EZPW if you'd like to own a company that makes more money when times are bad than when they're good. It's still small and only for risk takers, but it has aggressive expansion plans. If management can grow the company and still deliver the kinds of returns it's already demonstrated, then this stock should do well.

Company Web site: www.ezcorp.com

- Ted Allrich