Nicholas Financial Earns 44 Cents Per Share

Earlier today, Nicholas Financial ($NICK) reported quarterly earnings of 44 cents per share. This is for the first quarter of their fiscal year. Honestly, I’m not too concerned about the exact per-share number of NICK’s earnings. They should continue to report earnings somewhere around the mid-40s. In my eyes, the most important thing is that NICK’s business continues to hum along, and it clearly is.

The numbers bear this out. Reserves for credit losses are extremely low. Since the company has paid down some of its debt, interest costs have dropped to a rounding error (less than $1.2 million). Last quarter, the pre-tax earnings yield was 12.88%. Anything above 10% is good. NICK seems to be stepping up its contract purchases. I’d like to see more of that.

In short, NICK’s business is almost like a bond that pays 7.5% or so interest, but the stock’s earnings yield is more like 14%. The stock is roughly where it was six years ago even though profits are much higher and the business outlook is far more secure. I expect NICK to earn somewhere between $1.80 and $1.90 per share for this fiscal year. Expect more quarters to look like this one. I think Wall Street views NICK as some shaky subprime stock. If anything, the portfolio has grown more conservative.

I really don’t see why NICK can’t trade for 10 times earnings. That’s hardly extreme. Last August, the company announced that it would start paying a quarterly dividend of 10 cents per share. That’s barely a dent out of quarterly profits. I wouldn’t mind seeing a hefty dividend increase. NICK could go to 15 cents per share. Twenty cents would be great (and sustainable) although contract purchases would suffer. Still, there’s nothing wrong with owners getting their money.

Here’s a spreadsheet of NICK’s quarterly results over the past few years.

Posted by on August 2nd, 2012 at 6:07 pm


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