Intrinsic value of EZCORP, Inc. - EZPW

Previous Close

$9.11

  Intrinsic Value

$13.64

stock screener

  Rating & Target

buy

+50%

Previous close

$9.11

 
Intrinsic value

$13.64

 
Up/down potential

+50%

 
Rating

buy

Our model is not good at valuating stocks of financial companies, such as EZPW.

We calculate the intrinsic value of EZPW stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
Revenue, $m
  859
  906
  955
  1,006
  1,059
  1,115
  1,174
  1,236
  1,300
  1,368
  1,438
  1,513
  1,590
  1,672
  1,757
  1,847
  1,941
  2,040
  2,143
  2,252
  2,366
  2,485
  2,611
  2,743
  2,881
  3,026
  3,178
  3,338
  3,506
  3,682
Variable operating expenses, $m
  656
  691
  728
  767
  807
  849
  894
  940
  989
  1,040
  1,086
  1,142
  1,201
  1,262
  1,327
  1,394
  1,465
  1,540
  1,618
  1,700
  1,786
  1,876
  1,971
  2,070
  2,175
  2,284
  2,399
  2,520
  2,647
  2,780
Fixed operating expenses, $m
  128
  131
  133
  136
  139
  142
  146
  149
  152
  155
  159
  162
  166
  170
  173
  177
  181
  185
  189
  193
  197
  202
  206
  211
  215
  220
  225
  230
  235
  240
Total operating expenses, $m
  784
  822
  861
  903
  946
  991
  1,040
  1,089
  1,141
  1,195
  1,245
  1,304
  1,367
  1,432
  1,500
  1,571
  1,646
  1,725
  1,807
  1,893
  1,983
  2,078
  2,177
  2,281
  2,390
  2,504
  2,624
  2,750
  2,882
  3,020
Operating income, $m
  75
  84
  93
  103
  113
  124
  135
  147
  159
  172
  194
  208
  224
  240
  257
  276
  295
  315
  336
  359
  382
  407
  434
  461
  491
  522
  554
  588
  624
  662
EBITDA, $m
  98
  108
  118
  129
  140
  151
  164
  177
  190
  205
  220
  236
  253
  271
  290
  310
  330
  352
  376
  400
  426
  453
  482
  512
  544
  577
  612
  649
  689
  730
Interest expense (income), $m
  9
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
Earnings before tax, $m
  42
  50
  57
  66
  74
  83
  93
  103
  114
  125
  144
  157
  170
  184
  199
  214
  231
  248
  267
  286
  306
  328
  351
  375
  400
  427
  455
  484
  516
  549
Tax expense, $m
  11
  13
  16
  18
  20
  22
  25
  28
  31
  34
  39
  42
  46
  50
  54
  58
  62
  67
  72
  77
  83
  89
  95
  101
  108
  115
  123
  131
  139
  148
Net income, $m
  31
  36
  42
  48
  54
  61
  68
  75
  83
  91
  105
  114
  124
  134
  145
  157
  169
  181
  195
  209
  224
  239
  256
  274
  292
  311
  332
  354
  376
  401

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  842
  888
  936
  986
  1,039
  1,094
  1,151
  1,211
  1,275
  1,341
  1,410
  1,483
  1,559
  1,639
  1,723
  1,811
  1,903
  2,000
  2,101
  2,208
  2,319
  2,437
  2,560
  2,689
  2,824
  2,967
  3,116
  3,273
  3,437
  3,610
Adjusted assets (=assets-cash), $m
  842
  888
  936
  986
  1,039
  1,094
  1,151
  1,211
  1,275
  1,341
  1,410
  1,483
  1,559
  1,639
  1,723
  1,811
  1,903
  2,000
  2,101
  2,208
  2,319
  2,437
  2,560
  2,689
  2,824
  2,967
  3,116
  3,273
  3,437
  3,610
Revenue / Adjusted assets
  1.020
  1.020
  1.020
  1.020
  1.019
  1.019
  1.020
  1.021
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
Average production assets, $m
  238
  251
  264
  279
  293
  309
  325
  342
  360
  379
  398
  419
  441
  463
  487
  512
  538
  565
  594
  624
  655
  688
  723
  760
  798
  838
  880
  925
  971
  1,020
Working capital, $m
  178
  187
  198
  208
  219
  231
  243
  256
  269
  283
  298
  313
  329
  346
  364
  382
  402
  422
  444
  466
  490
  514
  540
  568
  596
  626
  658
  691
  726
  762
Total debt, $m
  434
  452
  470
  490
  510
  531
  554
  577
  601
  627
  654
  682
  712
  743
  775
  809
  845
  882
  921
  963
  1,006
  1,051
  1,099
  1,149
  1,201
  1,256
  1,314
  1,375
  1,438
  1,505
Total liabilities, $m
  326
  344
  362
  382
  402
  423
  445
  469
  493
  519
  546
  574
  603
  634
  667
  701
  736
  774
  813
  854
  898
  943
  991
  1,041
  1,093
  1,148
  1,206
  1,267
  1,330
  1,397
Total equity, $m
  516
  544
  574
  604
  637
  670
  706
  743
  781
  822
  864
  909
  956
  1,005
  1,056
  1,110
  1,167
  1,226
  1,288
  1,353
  1,422
  1,494
  1,569
  1,648
  1,731
  1,819
  1,910
  2,006
  2,107
  2,213
Total liabilities and equity, $m
  842
  888
  936
  986
  1,039
  1,093
  1,151
  1,212
  1,274
  1,341
  1,410
  1,483
  1,559
  1,639
  1,723
  1,811
  1,903
  2,000
  2,101
  2,207
  2,320
  2,437
  2,560
  2,689
  2,824
  2,967
  3,116
  3,273
  3,437
  3,610
Debt-to-equity ratio
  0.840
  0.830
  0.820
  0.810
  0.800
  0.790
  0.780
  0.780
  0.770
  0.760
  0.760
  0.750
  0.740
  0.740
  0.730
  0.730
  0.720
  0.720
  0.720
  0.710
  0.710
  0.700
  0.700
  0.700
  0.690
  0.690
  0.690
  0.690
  0.680
  0.680
Adjusted equity ratio
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613
  0.613

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  36
  42
  48
  54
  61
  68
  75
  83
  91
  105
  114
  124
  134
  145
  157
  169
  181
  195
  209
  224
  239
  256
  274
  292
  311
  332
  354
  376
  401
Depreciation, amort., depletion, $m
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
  50
  53
  56
  58
  61
  64
  68
Funds from operations, $m
  54
  60
  67
  74
  81
  89
  97
  105
  114
  124
  132
  142
  153
  165
  177
  190
  204
  219
  234
  250
  267
  285
  304
  324
  345
  367
  390
  415
  441
  468
Change in working capital, $m
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
Cash from operations, $m
  45
  51
  57
  63
  70
  77
  85
  92
  101
  110
  117
  127
  137
  148
  160
  172
  185
  198
  213
  228
  243
  260
  278
  297
  316
  337
  359
  382
  406
  432
Maintenance CAPEX, $m
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -56
  -58
  -61
  -64
New CAPEX, $m
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
Cash from investing activities, $m
  -27
  -29
  -31
  -32
  -33
  -35
  -36
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -81
  -84
  -88
  -93
  -98
  -102
  -107
  -113
Free cash flow, $m
  18
  22
  27
  31
  37
  42
  48
  54
  60
  67
  72
  80
  88
  96
  105
  115
  125
  135
  146
  158
  171
  184
  198
  212
  228
  244
  261
  279
  298
  319
Issuance/(repayment) of debt, $m
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  52
  55
  58
  61
  64
  67
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  52
  55
  58
  61
  64
  67
Total cash flow (excl. dividends), $m
  35
  40
  45
  51
  57
  63
  70
  77
  85
  93
  99
  108
  117
  127
  138
  149
  160
  173
  186
  199
  214
  229
  245
  262
  280
  299
  319
  340
  362
  385
Retained Cash Flow (-), $m
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
Prev. year cash balance distribution, $m
  259
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  267
  12
  16
  20
  25
  30
  35
  40
  46
  52
  57
  63
  71
  78
  86
  95
  104
  113
  123
  134
  145
  157
  170
  183
  197
  212
  227
  244
  261
  279
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  256
  11
  14
  17
  19
  21
  24
  25
  26
  27
  27
  27
  27
  26
  25
  24
  23
  21
  19
  17
  15
  13
  11
  9
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

EZCORP, Inc. provides pawn loans in the United States and Mexico, and consumer loans in Mexico. The Company operates through three segments: U.S. Pawn, which includes its EZPAWN, Value Pawn & Jewelry and other branded pawn operations in the United States; Mexico Pawn, which includes its Empeno Facil pawn operations and cash converters buy/sell store operations in Mexico, and Other International, which includes its CASHMAX financial services operations in Canada and its equity interest in Cash Converters International. It offers pawn loans, which are non-recourse loans, collateralized by tangible property, and it sells merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers at its pawn stores. The Company operates 21 pawn stores in the Mexican state of Sinaloa under the brand name Bazareno.

FINANCIAL RATIOS  of  EZCORP, Inc. (EZPW)

Valuation Ratios
P/E Ratio 15.5
Price to Sales 0.7
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 15
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 90%
Cap. Spend. - 3 Yr. Gr. Rate -3.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 43.1%
Total Debt to Equity 43.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 3.9%
Ret/ On Assets - 3 Yr. Avg. -2.6%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. -4.8%
Return On Equity 5.1%
Return On Equity - 3 Yr. Avg. -6.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 58.3%
Gross Margin - 3 Yr. Avg. 57.6%
EBITDA Margin 10.2%
EBITDA Margin - 3 Yr. Avg. 5%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 1.3%
Pre-Tax Margin 5.7%
Pre-Tax Margin - 3 Yr. Avg. -1.1%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. -6.4%
Effective Tax Rate 25.6%
Eff/ Tax Rate - 3 Yr. Avg. 15.6%
Payout Ratio 0%

EZPW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EZPW stock intrinsic value calculation we used $814 million for the last fiscal year's total revenue generated by EZCORP, Inc.. The default revenue input number comes from 0001 income statement of EZCORP, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our EZPW stock valuation model: a) initial revenue growth rate of 5.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for EZPW is calculated based on our internal credit rating of EZCORP, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of EZCORP, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of EZPW stock the variable cost ratio is equal to 76.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $125 million in the base year in the intrinsic value calculation for EZPW stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.9% for EZCORP, Inc..

Corporate tax rate of 27% is the nominal tax rate for EZCORP, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the EZPW stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for EZPW are equal to 27.7%.

Life of production assets of 15.1 years is the average useful life of capital assets used in EZCORP, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for EZPW is equal to 20.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $748.037 million for EZCORP, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 55.445 million for EZCORP, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of EZCORP, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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