Nicholas Financial

For today’s edition of “Widdle Biddy Stocks That Ain’t No One Never Heard Of,” I give you Nicholas Financial (NICK).
Nicholas is a Florida-based company that provides auto loans for used cars, a segment that’s often not served by larger lenders. I’m not joking when I say this is a small company, about 200 employees and a market value of $140 million. Citigroup, by comparison, is over 1,500 times larger.
But dude, check out NICK’s results:
Year…………Sales (mil)………EPS
1997…………..$6.21…………$0.12
1998…………..$7.94…………$0.13
1999…………$10.42…………$0.22
2000…………$14.07…………$0.34
2001…………$17.80…………$0.45
2002…………$20.22…………$0.50
2003…………$22.38…………$0.54
2004…………$25.50…………$0.64
2005…………$32.83…………$0.80
2006…………$42.68…………$1.01
That grabs my attention. NICK has certainly found a niche for itself. The company recently reported first-quarter results (the fiscal year ends in March). Net income grew 29%. The company earned 29 cents a share compared with 23 cents last year. This brings their trailing four-quarter earnings up to $1.07 a share. That means that the company is going for less than 14 times earnings.
There’s not much info on Nicholas, but here’s part of article on the company from 2004:

The interest rate Nicholas can charge is dictated by state regulations, and it won’t go into a state where it can’t get a rate of at least 20 percent.
Generally, Nicholas borrowers don’t qualify for traditional sources. The economy has made more people “credit-challenged,” but Finkenbrink says that doesn’t mean they are bad risks.
“We try to finance people who may have had trouble because of a divorce, medical problems or job loss, as opposed to ‘credit criminals,'” he said.
Creating relationships
The company’s branch system is key. Branches require overhead, but they put employees in touch with customers.
“Customers like to come into the office,” Finkenbrink said. “We create relationships, and employees often will counsel customers.”
The result is low delinquency. For the past few years, about 1 percent to 2.5 percent of total loans due at any one time are more than 30 days past due, according to an April 14 research report from Atlanta-based Westminster Securities.
Many larger companies pulled out of the sub-prime auto loan business in the 1990s when they failed to make a lot of money at it, said Will Lyons, Westminster director of equity research.
Currently, GMAC and Ford Motor Credit dominate the industry, and Nicholas has only one-tenth of 1 percent of the market, according to an investors presentation by Nicholas.
“Nicholas takes a personal approach to every loan they do,” Lyons said. “It costs a lot of money to do that, and big companies don’t want to take that kind of approach.”

Here’s the chart:

Posted by Eddy Elfenbein on August 9th, 2006 at 11:30 am

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