| Written by Peter Frank 
Pawn shops are not where most people park their savings, but FirstCash Holdings (NASDAQ: FCFS) could be an exception. FirstCash is a pawn company, and its stock is booming. With more than 3,300 stores across the United States, Latin America, and the United Kingdom, FirstCash has grown into one of the largest alternative finance companies for non-prime consumers. Its first-quarter earnings were up 30% year-over-year, its revenue was up 26%, and its shares are up more than one-third this year. It helps that people increasingly need these financial alternatives to manage their budgets. Whether that momentum is durable, however, depends on the future fortunes of consumers. Pawn Loans Create a Resilient Business ModelThe pawnshop business might not be what many investors expect. A pawnshop does not make unsecured loans or check credit scores. A customer brings in an item—mostly jewelry, but also electronics, tools, musical instruments, or something else of value—and receives a short-term loan using the item as collateral. If the customer repays the loan plus fees, they get their item back. If they do not, FirstCash keeps the item and sells it. The company makes money either way. That model makes the pawn business unusually resilient. When the economy is strong, customers pick up their items, and FirstCash earns fee income. When the economy weakens, more consumers need cash, pawn demand rises, and the company earns fees plus more profits by selling more merchandise. Right now, unfortunately for consumers, is a good time for pawnshops. FirstCash’s pawn receivables, or the value of outstanding loans secured by collateral, reached a record $851 million at the end of the first quarter, up 70% from a year earlier. Strong Pawn Demand Fueled First-Quarter ResultsThat helps explain the powerful first quarter. Consolidated revenue at FirstCash increased 26%, reaching $1.05 billion versus $836 million a year ago. Net income came in at $108 million, up 29% on a GAAP basis. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 29% to $211 million. Fully diluted earnings per share increased 30% to $2.43 on a GAAP basis and $2.69 on an adjusted basis, above expectations. Driving these results was an exceptionally strong performance from all three of its pawn segments. Combined pawn revenues increased 40% in the first quarter YOY, and total income from the pawn segment rose 60% over the same period. In all, FirstCash ended the first quarter with 3,334 store locations, including 1,207 in the U.S., 1,838 in Latin America, and 289 in the U.K. Consolidated assets at March 31 hit a record $5.4 billion, compared to $4.4 billion a year ago. All 3 Pawn Segments Are Driving GrowthThe U.S. pawn segment is its largest business, with $489 million revenue in the first quarter. And demand has grown. The company posted 16% revenue growth with pre-tax operating income rising by 25%. U.S. same-store pawn receivables grew 19%, the eleventh consecutive quarter of double-digit growth. Pawn loan fees rose 14% and retail merchandise sales grew 13% in the U.S., with retail margins improving to 44% from 42% a year ago. Latin America’s growth was even more striking. Total segment revenue rose 40% adjusted to U.S. dollars, and the segment’s pre-tax operating income hit a record $51 million, up 62% in dollar terms. Results benefited somewhat from exchange-rate fluctuations. On a local currency basis, both revenue and pawn fees grew 23%. The U.K. segment is relatively new but has already contributed twice as much as Latin America. FirstCash acquired H&T, the U.K.’s leading pawnbroker in August 2025. That operation contributed $102 million in first-quarter revenue with a 39% pre-tax operating margin. Pawn receivables in the U.K. reached $215 million, up 29% on a same-store local currency basis, compared with the pre-acquisition prior year. American First Finance Expands Its Reach Beyond PawnshopsIn addition to its pawn footprint, FirstCash also owns American First Finance, which it bought five years ago, significantly expanding its reach into the buy now, pay later and lease-to-own sectors. That operation brings in roughly 20% of the company’s revenue. Today, American First has about 16,600 active retail and e-commerce point-of-sale merchant partner locations, up 14% from a year ago. For the quarter, the lending unit was the only segment to decline. But the decline was expected as the year-ago period included run-off revenue from earlier merchant partner bankruptcies. The segment posted pre-tax operating income of $26 million with gross revenue down 11%. Management Raises Its Outlook for 2026Given the recent results, FirstCash raised its full-year 2026 revenue guidance. Pawn operations are expected to account for nearly 90% of total net revenue and segment pre-tax income for the full year, it said. Already in April, same-store pawn receivables were running up more than 20% in the U.S. YOY, and retail merchandise sales are expected to grow 10% or more. Its Latin American business is projected to grow in the mid- to high-teens. And for the U.K., full-year income is now expected in the range of $125 million to $135 million, up from prior guidance of $115 million to $125 million. Analysts Continue to View the Stock FavorablyWith FirstCash’s business model and predictions of further consumer pressures, it’s perhaps not surprising that analysts overall are giving the company a solid Buy rating. The stock is already up more than 60% from a year ago and over 30% this year alone. Although the consensus 12-month price target is slightly lower than current trading levels, five analysts rate the company a Buy, with one listing it as a Hold. The highest price target is $252 a share, with the lowest sitting at $145. Although not dividend-rich, the company has increased its payout to shareholders for eight consecutive years. It currently pays 42 cents a share quarterly and spent $50 million in the first quarter out of a $150 buyback program, repurchasing shares. Investors Should Keep Several Risks in MindFirstCash might be a well-run company in a misunderstood niche of the financial sector, but it’s not without its risks. Significant growth has come through acquisitions, which can bring regulatory, cultural, and system integration headaches. Currency risk is also real. A large portion of its pawn stores operate in Mexico, and the company estimates that each full-point change in the dollar-to-peso exchange rate affects annual earnings by roughly 10 to 12 cents per share. A comparable shift in the British pound could move earnings by 7-9 cents. And FirstCash is not a neglected value play. At a P/E ratio above 25, significant value is already priced in. But the pawn business has been around for centuries, and it’s not going away. If you're looking for a financial company that profits whether the economy booms or busts, the pawn industry’s three gold balls might look good in your portfolio.  Read This Story Online |
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