More on NICK’s Earnings

I’ve looked through Nicholas Financial’s (NICK) earnings and the numbers look solid. Almost all the metrics improved over last quarter. However, there could be some seasonality to their business. Comparisons with a year ago almost seem like comparing them to the 19th century.
The company earned 20 cents a share. Annualized, that’s 80 cents which means the stock could be going for around four times earnings. Book value per share is now $8.21. Also remember that in 2006 and 2007, NICK earned over $1 a share.
The big worry I have each quarter is the line “Provision for credit losses as a percentage of average finance receivables, net of unearned interest.” That’s the unhappy line. The good news is it fell from 8.77% in the December quarter to 6.26% in the March quarter. That’s a difference of $1.3 million which is huge for a company like NICK. It’s still higher than a year ago, 6.26% to 5.20%, but we’re not seeing the huge increases from previous quarters. In the third quarter, for example, loss provisions were up 225% from the year before.
I have little doubt that NICK will survive the only question is when will things turnaround. Delinquencies are down a lot from last quarter, though that may be seasonal. There was a similar drop, though not as large, between the third and fourth quarters of a year ago. Delinquencies are still up from a year ago, but again, they seem to be leveling off.
The bottom line is that this was a very good quarter for NICK. In fact, I wasn’t expecting to see numbers like this until later in the year. At this rate, the loss provisions may soon show year-over-year decline. That will be time to celebrate.
I’ll repeat what I’ve said before about NICK. It won’t be a fun stock to own. It’s small and may drive you crazy. In fact, most investors shouldn’t own it. But if you have a long time horizon and can safely ignore a microcap, then NICK is a great buy.

Posted by on May 6th, 2009 at 7:10 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.