Posts Tagged ‘nick’

  • Nicholas Financial Raises Dividend By 20%
    , August 8th, 2012 at 2:53 pm

    Nicholas Financial ($NICK) announced that it is raising its quarterly dividend by 20%. The payout is rising from 10 cents per share to 12 cents per share.

    Nicholas Financial, Inc. announced today that its Board of Directors has declared a cash dividend of $.12 per share on its common stock. This represents a 20% increase from its previous dividend of $.10 per share. The dividend will be paid on September 6, to shareholders of record as of August 30, 2012.

    Peter L. Vosotas, Chairman and CEO noted, “Our capital position and continued confidence in our earnings capability played a large part in the Board of Director’s decision to increase our quarterly cash dividend 20% from $.10 to $.12 per share. The dividend yield, based on the most recent closing price of $13.44, will be approximately 4%.”

    Subject to market conditions and profitability targets, the Company anticipates it will continue to declare quarterly cash dividends in the future; however, no assurances can be given. In the fiscal year ended March 31, 2012, the Company reported earnings of $1.85 per share. In the first quarter of the 2013 fiscal year which ended June 30, 2012, the Company reported earnings of $0.44 per share.

    The annual dividend of 48 cents per share works out to a yield of 3.57% based on yesterday’s closing price.

  • Nicholas Financial Earns 44 Cents Per Share
    , August 2nd, 2012 at 6:07 pm

    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.

  • Reader’s Take on Nicholas Financial
    , May 10th, 2012 at 1:19 pm

    One of my readers wrote up his take on Nicholas Financial ($NICK) and I offered to run it here:

    What Would You Pay For This Company?

    by DTEJD1997

    What would you pay for a company with the following dozen characteristics?

    * Has a return on equity of 17.7%
    * Has a return on assets of close to 9%
    * was profitable through the 2008 financial meltdown
    * Has made profits every year that it has been publicly traded
    * Has increased profits in eight of the last ten years
    * Has increased EPS at a compound rate of 13.71% for the past 11 years
    * Has grown book value EVERY year for the past 10 years
    * Has grown book value at a 16.75% COMPOUND rate for the past 10 years
    * Has increased sales EVERY year for the past 10 years
    * Has increased sales at compound rate of 11.68% for the past 11 years
    * Has more shareholder equity than debt
    * Is very conservatively managed compared to its peers

    From the above financial metrics, we can see that this is a profitable, well-managed company.

    Would you be willing to pay 10X earnings?
    Would you be willing to pay 12X earnings?
    Would you be willing to pay MARKET earnings?
    Would you be willing to pay a small PREMIUM to market earnings?

    Great! Well what can we buy into this company for? How about a 6.8 P/E ratio and a price to book of about 1.1X?

    I almost forgot, it has a dividend yielding over 3%.

    Sound interesting?

    What is this mystery company? Why it is:

    Nicholas Financial ($NICK)

    I posit that this company is generally misunderstood and not given proper credit, resulting in an abnormally low valuation.

    NICK will be eventually be valued at a more normal valuation level once it is commonly understood what a good company this is.

    NICK’s Business Model

    NICK has field agents that go to “buy here, pay here” auto lots. They work out of branch offices. They will look at the book of loans that the lot has and make an offer on what they believe are good credit risks. Typically NICK will pay about 91 cents on the dollar for the loans. The loans have average interest rates of about 24% and have loan life of about 48 months. The average amount financed is $9,700. NICK is looking for people that have temporarily bad credit or life circumstances that are temporary in nature. NICK does most of their underwriting using metrics OTHER than a FICO score. As a result of this, NICK’s buyers are very finicky and will only purchase maybe 1 in 25 loans that they look at.

    Management also has a database on car values and the likelihood each one will enter in default. Certain models attract lower quality buyers. Certain models also hold their resale better if repossessed. Their proprietary database of vehicle defaults and liquidation values adds to their underwriting prowess.

    A further addition to the margin of safety is that NICK typically pays only 91 cents on the dollar for the loans.

    NICK is very aggressive about repossessing vehicles. They make it very clear that they will do so shortly after the loan is delinquent.

    Here is my line of reasoning:

    It is very probable that we will see a situation analogous to what transpired at America’s Car-Mart ($CRMT). (I owned and traded CRMT in the past but no longer own it.)

    To briefly describe the situation: CRMT is the largest publicly traded “Buy Here, Pay Here” auto dealer. They operate in a slightly different manner than NICK, but operate in the same industry, sub-prime auto financing. CRMT’s management is also fairly conservative, and has traditionally had similar returns on equity and ROA as NICK has. CRMT has gone in price from about 11 to 44 in the past five years. They have increased earnings per share from $1.39 in 2006 to $3.06 in 2012. CRMT’s P/E ratio has gone from mid to high single digit (8 or 9), to low to mid teens (13 or 14).

    What brought CRMT that higher valuation was sustained, steady growth in revenue and earnings. This resulted in increased investor awareness. CRMT became more recognized in the financial community with articles and mentions in VIC, Motley Fool, Investor’s Business Daily, Forbes, Seeking Alpha, and others. Increased revenue and earnings brought higher awareness, higher awareness has brought a higher valuation.

    CRMT now trades for about a 14 P/E ratio. I think that CRMT’s valuation is about right and fully valued. If NICK can make it to CRMT’s valuation levels, it would be a double immediately. NICK does not have to reach CRMT’s valuation level to make it a market beating investment, it just needs to come close.

    The end result was that CRMT increased its business and eventually found increased investor awareness and acceptance. It took many years for CRMT to accomplish this. NICK is ready to do the same thing.

    NICK is conservatively run and unique in their industry for a variety of reasons.

    * They review a large number of loans before purchasing, purchasing about 1 in 25 loans reviewed.
    * NICK measures risk through factors other than raw credit scores, such as impressions made during an interview, income level, stability, type of vehicle and others. This is why the company has a lower charge-off rate.
    * They hold the loans till they get paid off or default, there are no resales, and no loan securitization.
    * Employee pay is based off of quality of cash flow from purchased loans.
    * NICK is not heavily leveraged with debt. Debt is about $110 million versus shareholder equity of about $140 million.
    * NICK remained profitable throughout the financial crisis.

    If NICK were not well run, they would not have been able to post the numbers they have over the last 10 years.

    Value of NICK’s Business

    NICK’s management thinks that the sub-prime market is at least $250 billion in size in the US. Unfortunately, I think sub-prime auto lending is going to be a huge growth industry for the foreseeable future. In five years could the sub-prime auto loan market be $300 billion? I bet it could. Could NICK eventually get 1% of that? If they could, the company would grow approximately 10X. NICK has no operations on the west coast, plains states, or New England states. NICK’s field office now includes, sixty (60) offices located in Florida, Alabama, Georgia, Kentucky, Indiana, Maryland, Michigan, North Carolina, Ohio, South Carolina, Tennessee, Virginia, Illinois and Missouri. Thus, there is plenty of geographic expansion opportunities.

    NICK is going to be opening 3 new branch offices in the upcoming 1st quarter of fiscal year 2013. So that will be growth of maybe 4% from new locations, as new locations take a bit of time to get fully up to speed. I strongly suspect they will open new branches in every subsequent quarter, maybe 1 each quarter. The existing 60 branch offices will probably grow to 65 locations by the end of the year. The existing branches should also be able to grow loan growth in the low single digits. Add it up and you can easily get 9% growth in loan volume. That might even be a bit conservative.

    I am sure NICK could grow at a faster rate if they took on more underwriting risk.

    It is clear that NICK is growing its business at ABOVE market rates. NICK also has plenty of room for future expansion.

    NICK does not have large amount of debt relative to assets. They have more shareholder equity than they have in debt. As a result of this conservative level of leverage, NICK is not reliant on lenders to grow their business. NICK can grow out of retained earnings. NICK has about $136 million in shareholder equity, with an offsetting debt level of about $121 million. Compare this level of equity to your average bank! The average cost of NICK’s debt is about 4.25%.

    Even with this low amount of financial leverage they are able to earn 18% ROE and a 9% ROA. NICK’s management is organically growing the company at about 9% a year.

    NICK’s business has allowed them to produce SUPERIOR economic returns year after year, in up and DOWN markets. Clearly, NICK’s financial results are not a one time event. Nor are they are a result of management’s “luck”. NICK’s results are the result of talented management and workers, and a superior business model.

    Businesses growing at ABOVE market rates and ABOVE market returns are what most investors are looking for.

    A plausible argument can be made that NICK operates in a difficult market, and thus should have a discount. A plausible argument can be made that NICK is a small-cap company and should further trade for a discount. How much of a discount is warranted?

    The S&P 500 is trading for almost a 16 P/E ratio. I would grant that NICK should trade for a discount because of its industry and size. Take off 1 P/E point for each and you’ll come to a 14 P/E. A 14 P/E is what CRMT is trading for. I think CRMT is a comparable company to NICK. Take off another 2 points just to be conservative and you’ll come to a 12 P/E. At the date of 5.4.12, a 12 P/E would put NICK at a price of $22.20, which is almost 10 points higher than where it currently trading for!

    What could go wrong?

    NICK operates in a business that is somewhat objectionable. Senior management is getting up in years and will probably be looking to retire and cash out in a few years. I don’t think they will take too low a price as they have already rejected a few buyout offers. There is a risk that up & coming management will not be as good as current management who started the company (and own most of it).

    NICK is susceptible to downturns in the economy and most of their business is in the south-east (Florida) and the mid-west. NICK’s customers are very economically sensitive. A downturn in the general economy will hurt NICK’s customers.

    NICK could be subject to regulatory scrutiny. However, I don’t think that is too much of a problem. After all, Congress did away with most usury laws.

    NICK is vulnerable to other competitors in the industry acting irrationally. (Come on down to Jimbo’s used car lot! Just sign and drive! Every one gets financed! I’ve lost my mind! EVERYONE GETS CREDIT, JUST SIGN AND DRIVE!) This was a major problem in the past. Eventually, undisciplined, irrational companies run out of capital and go bust.

    Conclusion:

    The end result is that NICK should be trading at a much higher price-to-earnings ratio.

    As time passes, NICK will continue to grow its assets. NICK will continue to increase earnings. NICK will increase its dividend.

    Earnings of $0.50/share were reported for the last quarter. I think the company will easily top $2/share in earnings for the upcoming 12 months. It is only a matter of time before the market takes notice of this and bids the price of NICK up.

    An investor is thus going to make money when:

    A). There is an increase in the P/E ratio from under 7, to maybe a range of 12 or 14.
    B). NICK is growing about 9% a year organically.
    C). NICK is paying a dividend of about 3%, it is likely to raise it in the future.

    I think an investor could easily receive a 20% IRR over the next 4 to 6 years.

    *Please do your own due diligence. I and my family own shares in NICK and may trade them without advance notice.

  • Nicholas Financial Earns 50 Cents Per Share
    , May 2nd, 2012 at 10:39 am

    Great report for fiscal Q4. For the quarter, Nicholas Financial ($NICK) earned 50 cents per share and for the year, they earned $1.85 per share.

    Nicholas Financial, Inc. announced that for the three months ended March 31, 2012, net earnings increased 27% to $6,045,000 as compared to $4,772,000 for the three months ended March 31, 2011. Per share diluted net earnings increased 25% to $0.50 as compared to $0.40 for the three months ended March 31, 2011. Revenue increased 7% to $17,182,000 for the three months ended March 31, 2012 as compared to $16,095,000 for the three months ended March 31, 2011.

    For the year ended March 31, 2012, net earnings increased 32% to $22,230,000 as compared to $16,805,000 for the year ended March 31, 2011. Per share diluted net earnings increased 31% to $1.85 as compared to $1.41 for the year ended March 31, 2011. Revenue increased 9% to $68,167,000 for the year ended March 31, 2012 as compared to $62,774,000 for the year ended March 31, 2011.

    “Our strong growth in earnings per share for the fourth quarter and year ended March 31, 2012 were largely impacted by a reduction in the provision for credit losses. Net charge offs during the current periods were less than the expected charge-offs previously contemplated in the allowance for loan losses. Accordingly, the amount of additional provision necessary to maintain an adequate allowance to absorb losses in the existing portfolio was less than the provision for prior periods,” stated Peter L. Vosotas, Chairman and CEO. Subject to market conditions, we plan on continuing our branch expansion and currently anticipate opening three additional locations during the first quarter of fiscal 2013.

    As a result of our continued earnings growth and stable capital position, on May 2, 2012 the Board of Directors declared another quarterly dividend equal to $0.10 per common share, to be paid on June 6th to shareholders of record as of May 30th.

    The provision for credit losses was actually negative, meaning it added $707,000 to pre-tax income. For the entire year, the provision for credit losses was $5,000 which is a nice improvement from the $4.6 million from last year.

    Here are NICK’s stats which detail NICK’s operations over the past few years. The shares had been selling off going into earnings but have recovered somewhat today.

  • CWS Market Review – April 13, 2012
    , April 13th, 2012 at 8:20 am

    That money talks, I’ll not deny, I heard it once: It said, ‘Goodbye’.
    -Richard Armour

    After sliding for five days in a row, the stock market has started to right itself. On the first trading day of April, the S&P 500 closed at a 46-month high but promptly broke up like a North Korean rocket and shed 4.26% in a week. That’s not a major pullback, but it’s one of the biggest slumps we’ve seen in months. Thanks to rallies on Wednesday and Thursday, the market has already made back half of what it lost (in fact, the traceback has been almost exactly 50%).

    What’s most surprising about the market so far in April is the recrudescence of volatility on extremely low volume. Consider this: In the first 64 trading days of 2012, the S&P 500 suffered just one daily drop of more than 1%. In 2011, that happened 48 times. Then suddenly, we had three 1% drops in four days. Yet average daily trading volume last month was the lowest since December 2007. What gives?

    In this issue of CWS Market Review I want to look at why the market has gotten so jittery all of a sudden. But more importantly, I want to take a look at the first-quarter earnings season. Over the next month, 16 of our Buy List companies are due to report earnings. As always, earnings season is the equivalent of Judgment Day for Wall Street. I’m expecting good news for our stocks, but the outlook may not be so sunny for the rest of Wall Street.

    Sorry, Folks. QE3 Is Not Coming

    Part of the reason why the stock market got a sudden case of the worries is what I mentioned in the previous two editions of CWS Market Review. Wall Street has been focused on the March jobs report and first-quarter earnings season. The jobs report wasn’t so hot and the market took its pound of flesh. Earnings season is the next hurdle.

    Interestingly, the stocks that dropped the most during the five-day selloff were often the ones that rallied the most on Wednesday and Thursday. These tended to be cyclical stocks and financials. It’s also interesting to note that the Morgan Stanley Cyclical Index (^CYC) had peaked on March 19th, two weeks before the rest of the market. This means, the cyclicals had already started to erode before the jobs report pullback.

    The stock market was given a boost on Thursday when two Fed officials, Janet Yellen and William Dudley, said that rates will have to stay low for a while longer. That‘s not a big surprise. Let me add a quick note on QE3. Some folks think the weak jobs report will cause Bernanke and his buddies at the Fed to jump in with a third round quantitative easing. Do not believe any of this. We often forget that the C in FOMC stands for “committee” and it’s obvious that the policy-makers are very far from a consensus on this issue. The media has been searching for any hint, no matter how trivial, that QE3 is on the way. It’s not. Plus, the jobs report was hardly a harbinger of a new recession. For now, the talk of QE3 is pure nonsense.

    Although the selloff was initially triggered by the jobs report, it was kept alive by bad news from Europe and China. The yield spreads in Europe (specifically, between any country and Germany) have been inching upward, particularly in Spain. I think it’s somewhat amusing that Monsieur Sarkozy is using the example of Spain to scare French voters from supporting the socialist opposition in next month’s election.

    The wider spreads signal some nervousness from investors but it’s important to note that we’re a long way from the frenzy we had last year. I want to urge investors not to be carried away by these renewed concerns from Europe. The fears of Spain not being able to pay her bills are greatly overblown. Europe will not sink the U.S. stock market.

    Q1 Earnings: The Story Is About Margins

    Last earnings season was disappointing. This time around, investors don’t expect much. The numbers vary but the consensus is that first-quarter earnings will be about the same as they were last year. In other words, zero profit growth. How times have changed. Not that long ago, analysts were expecting double-digit earnings growth for Q1.

    One of the problems facing many companies is that higher fuel costs are cutting into profits. All 10 sectors of the S&P 500 will see higher sales numbers, but at least seven of those sectors will have a hard time turning those top-line dollars into bottom-line profits.

    The story here isn’t that a slowdown is upon us. Rather, it’s that business costs are rising after being held back for so long. Part of this is the cost for new employees, which is a good thing. As I’ve said before, the story here is about margins, not a weakening economy. Even with as much as earnings growth estimates have fallen, the stock market hasn’t responded in kind. That’s because Wall Street correctly sees this as a temporary issue. In fact, the current view is that earnings growth will reaccelerate later this year as Europe comes back online.

    The important point for us is that even with little earnings growth, the stock market is still a very good value compared with the competition. Bond yields have climbed, but they’re still way too low. As long as the migration away from super-safe assets continues, our Buy List will thrive.

    Now I want to focus on some upcoming earnings reports for our Buy List stocks (you can see an earnings calendar here). Unfortunately, not all of our companies have said when earnings will come out yet.

    Expect an Earnings Beat at JPMorgan

    On Friday, JPMorgan Chase ($JPM) will be our first Buy List stock to report earnings. With a 34.86% year-to-date gain, the bank is our top-performing stock this year. That’s not bad for a little over three months’ work. (It’s always a surprise to me who the #1 stock will be.) What’s remarkable is that even with as well as the stock has done, the shares are still going for less than 10 times this year’s earnings estimate.

    Wall Street currently expects JPM to report earnings of $1.14 per share for Q1. That’s down a little from one year ago. That estimate, however, has been climbing in recent weeks while estimates for many other companies have been pared back. I’ve looked at the numbers and I expect a small earnings beat from JPM. But I’ll be curious to hear what CEO Jamie Dimon has to say about the bank’s business.

    Not only is JPM a big report for us, but it’s also a bellwether for the entire financial sector. Jamie Dimon likes to see himself as the unofficial spokesman for the banking world and a lot of investors want to hear what he has to say. JPM even moved up their earnings call so Jamie could hit the stage before Wells Fargo ($WFC).

    I agree with Dimon’s assessment that the last earnings report was “modestly disappointing.” One of the concerns this time around is investment banking, but Jamie has been clear that the division will rebound. For Q1, trading profits will probably be down from a year ago but better than Q4. This is a solid bank and I was particularly impressed by the 20% dividend increase. Bottom line: I’m sticking with Jamie, and I’m raising my buy price on JPMorgan Chase from $45 to $50 per share.

    Johnson & Johnson: 50 Straight Years of Dividend Increases

    Next Tuesday, we’ll get two more earnings reports—Johnson & Johnson ($JNJ) and Stryker ($SYK). I’m afraid that J&J has been a weak performer this year. In January, the healthcare giant said that earnings-per-share for 2012 will range between $5.05 and $5.15. Wall Street had been expecting $5.21.

    J&J has been dogged by a series of quality control problems, and the stock has lagged. Later this month, Alex Gorsky will take over as the new CEO. I think that’s a good choice particularly since he helped the company tackle its internal problems. Wall Street’s consensus for Q1 is for $1.35 per share which is exactly what Johnson & Johnson made one year ago. The stock usually beats by about three cents per share, but I’m not going to get worked up by a result that’s within a few pennies of $1.35. What I want to see is solid proof of a turnaround, although I realize it may take some time.

    The best part about J&J is the rich dividend. Going by Thursday’s close, the stock yields 3.55%. But the yield to investors is probably even higher. Later this month, I expect the company to announce its 50th-straight dividend increase. But coming after January’s lower guidance, the quarterly dividend will probably rise from 57 cents to 60 cents per share. If that’s right, J&J now yields 3.74%. I’m keeping my buy price at $70.

    Stryker Is a Good Buy Up to $60

    Shares of Stryker ($SYK) haven’t done much for the past several weeks which is puzzling because the business has been strong. Stryker has said that it sees “double digit” earnings growth for 2012. I doubt they’ll have trouble hitting that forecast. In fact Stryker is probably low-balling us, but that’s understandable since the year is still so young.

    For Q1, the Street expects earnings of 99 cents per share which sounds about right. Stryker rallied last earnings season after they met expectations. The business tends to be very stable. I think the stock is a good value here and I’m raising my buy price to $60 per share.

    Before I go, I want to highlight some other good values on the Buy List. Among the financials, AFLAC ($AFL), Nicholas Financial ($NICK) and Hudson City ($HCBK) are all going for a good price. I also think that Ford ($F) has drifted down to bargain territory as well.

    That’s all for now. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

  • Goodbye Dow 13,000
    , April 9th, 2012 at 5:26 pm

    Today was an ugly day on Wall Street. The market is still reeling from Friday’s jobs report. The cylicals were hit especially hard as were many financials.

    There are a few things to remember: The market has climbed almost continuously for six-straight months, so some give back is to be expected. Also, the jobs report is hardly evidence that the new recession is on the way. It merely signals that jobs growth isn’t quite as robust as we thought. These numbers will be revised and the other evidence continues to show a modestly improving jobs environment.

    One outlier in today’s selloff was Nicholas Financial ($NICK). The shares closed at $12.42 which is a 5.48% fall from Thursday’s close. The stock got as low at $12.14 in today’s trading. I wouldn’t worry about this at all.

    There’s absolutely no news to indicate that NICK is in any trouble. This is purely a market-driven event. If anything, the belief that the Fed will hold down rates for a while longer is actually good news for NICK. Going by today’s close, the stock yields 3.22%.

  • Nicholas Financial Earns 45 Cents Per Share
    , February 2nd, 2012 at 9:51 am

    Another great quarter from Nicholas Financial ($NICK):

    CLEARWATER, Fla., Feb. 2, 2012 (GLOBE NEWSWIRE) — Nicholas Financial, Inc. (Nasdaq:NICK – News) announced that for the three months ended December 31, 2011 net earnings increased 20% to $5,363,000 as compared to $4,475,000 for the three months ended December 31, 2010. Per share diluted net earnings increased 18% to $0.45 as compared to $0.38 for the three months ended December 31, 2010. Revenue increased 7% to $17,140,000 for the three months ended December 31, 2011 as compared to $15,995,000 for the three months ended December 31, 2010.

    For the nine months ended December 31, 2011 net earnings increased 35% to $16,186,000 as compared to $12,033,000 for the nine months ended December 31, 2010. Per share diluted net earnings increased 34% to $1.35 as compared to $1.01 for the nine months ended December 31, 2010. Revenue increased 9% to $50,985,000 for the nine months ended December 31, 2011 as compared to $46,679,000 for the nine months ended December 31, 2010.

    “Our strong growth in earnings per share for the three and nine months ended December 31, 2011 were primarily the results of a reduction in the net charge-off rate,” stated Peter L. Vosotas, Chairman and CEO. We also recently opened our 60th branch location in Kansas City, MO and we continue to develop additional markets.

    As a result of our continued earnings growth and stable capital position, on January 31, 2012 the Board of Directors declared another quarterly dividend equal to $0.10 per common share, to be paid on March 20th to shareholders of record as of March 13th.

    A year ago, I wrote that I wouldn’t be surprised to see NICK earn as much as $1.50 per share for this calendar year. Then in July, I upped my forecast to $1.70 per share. In October, I raised it to $1.75 per share.

    As it turns out, my last forecast was right: NICK earned $1.75 per share for the 2011 calendar year. Note that NICK’s fiscal year ends on March 31st. I’m just using the calendar year for the sake of comparison.

    Going by NICK’s closing price yesterday of $13.45, the stock is going for 7.7 times earnings. That means it has an earnings yield of 13%.

  • The Market Is Up on Lower Jobless Claims
    , February 2nd, 2012 at 9:47 am

    The stock market is up a bit this morning. The good news was that jobless claims fell by 12,000 to 367,000. This is the tenth-straight week that jobless claims have been below 400,000. That’s a good number but the real test will come tomorrow morning when the Labor Department releases the jobs report for January.

    The other bit of economic data showed that worker productivity rose by 0.7% (annualized) in the fourth quarter. That’s down from 1.9% in the third quarter. On CNBC, Steve Liesman said that it’s probably best to view this data as the average of the third and fourth quarters. I think he’s right.

    Ben Bernanke will be speaking before Congress later today. We also have two more earnings reports: Fiserv ($FISV) and Nicholas Financial ($NICK). Fiserv will report after the close but NICK will report during the day. The stock has been climbing higher recently. I think we’ll see more good news from them.

  • CWS Market Review – December 2, 2011
    , December 2nd, 2011 at 8:04 am

    If you were expecting a calm, reasoned financial market going into the holidays, I’m afraid you may be disappointed. On Wednesday, the Dow soared 490 points for its single-best day in nearly three years. This came after the stock market suffered its worst Thanksgiving week since 1932.

    Usually, when the market does as well as it did on Wednesday, it’s following a big down day. But Wednesday’s move came after a slight rally on Tuesday. The S&P 500 gained 4.33% on Wednesday which was its eighth-best gain following an up day in the last 70 years.

    I was pleased to see that stocks only finished modestly lower on Thursday. The S&P 500 is now back above its 50-day moving average and it’s only a small push from breaking above its 200-day moving average.

    In this issue of CWS Market Review, I want to delve into some of the reasons for the market’s abrupt about-face. I’ll also tell you how to position your portfolios for the last few weeks of 2011. Remember that historically, the best time of year for stocks is a 17-day run from December 22nd to January 7th. More than 40% of the Dow’s historical gain has come during this period which is less than 5% of the calendar year.

    The catalyst for Wednesday’s rally was—we’re told—the news that the Fed teamed up with other central banks to provide more liquidity for the global financial system. Allow me to explain; it’s all very simple. The Federal Reserve and other central banks agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements from OIS +100 basis points to…ugh…getting sleepy…can’t…stay…awake…zzzzzzzz.

    Look, forget all the mumbo-jumbo. The stock market did not see one of its best rallies in decades because some bureaucrats put out a press release. Thankfully, they’re not that important. Instead, the market rallied because the market’s cheap. It’s that simple. The problem is that no one wanted to be first in the pool. I don’t blame them. Playing the bear had been the winning trade for three-straight weeks. Screaming you’re scared from the rooftops is the only trade that’s made anyone any money. Plus, our friends across the pond have been doing their best to show that they’re as clueless on how to run their economies as we are in running ours.

    To borrow from Comrade Trotsky, you may not be interested in the European financial crisis but the European financial crisis is interested in you. The news from Europe has been the main driver of the U.S. market for the last several weeks. But as I mentioned in the CWS Market Review from two weeks ago, our markets are slowly disentangling themselves from the mess in Europe.

    Just look at the decent economic news we’ve had recently. Please note that I’m not saying “good news,” just that there’s zero evidence of an imminent Double Dip. The fact that we can say that in December would have surprised a lot of folks this summer. For example, this past earnings season was pretty good. Thursday’s ISM report was decent. The Chicago PMI just hit a seven-month high. I’m writing this in the wee hours of Friday morning so I don’t know what the jobs report will say (check the blog for updates), but this week’s ADP report was very encouraging.

    Next Friday will be the big EU summit. This is it—Zero Hour. The Germans want more fiscal integration, and I think they’ll get it (of some sort). The Germans finally got religion once one of their bond auctions fizzled. When the country that’s supposed to bail everyone else out can’t get a loan, well…then it’s time to worry.

    But now the Germans have stopped dragging their heels. Anyone with a sense of history will have to appreciate the recent quote from Radek Sikorski: “I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.” Strange days, no?

    For Europe, this is beginning to feel like the fall of 2008. France’s AAA credit rating is on life support. Despite the bond auction disaster, the German one-year note recently went negative meaning that investors would prefer to take a loss just so they can be a creditor to Germany. This is exactly the kind of hysteria that’s been rattling our markets since August. It’s a mystical aura of fear, and that’s masking a truly inexpensive American market (Ford’s at 5.6 times 2012 earnings!)

    Now that everyone’s been suitably freaked out, they can finally do something. In fact, we’re starting to get an idea of what the game plan will look like. The basics are that Germany wants the ECB on a tight leash while it wants to set hard rules for how budgeting is done in the Euro zone. No surprises there. I suspect the Germans may give up their opposition to joint euro-bonds if the member states agree to some sort of debt-reduction fund. I’m not sure of the details, but something the market likes will come out of the summit. That’s not a guess. There’s no other alternative.

    But this crazy correlation we’ve had to Europe makes no sense. Here in the U.S., investors are quietly warming up to risk. We’ve already seen high-yield spreads in the U.S. begin to narrow as Treasury yields have climbed. Since December 23rd, the yield on the 30-year Treasury has risen by 30 basis points to 3.12%. The 10-year yield is up to 2.11% which is its highest yield in more than one month. As recently as July 25th, the 30-year was at 4.31%.

    Now let’s turn to some recent news from our Buy List. On Tuesday, Jos. A. Bank Clothiers ($JOSB) reported very good earnings for its fiscal third quarter. The company earned 54 cents per share for the three months ending on October 29th, which was three cents better than Wall Street’s estimate.

    JOSB’s business continues to hum along: earnings grew by 19% last quarter and revenues rose by more than 20%. The company has now reported higher earnings in 40 of its last 41 quarters including the last 22 in a row. However, there was one hitch. In the earnings report, JOSB warned that the fourth quarter “has started out more slowly than we had planned.”

    The market didn’t like that at all and chopped 3.7% off the stock on Wednesday in the face of a big rally plus another 2.4% on Thursday. Until we hear more, I’m inclined to side with Joey Banks. This is a very solid company. Some of you may recall six months ago when the market slammed JOSB for a 13% one-day loss after it missed earnings by—are you ready?—one penny per share. JOSB is a very good buy below $54 per share.

    In the CWS Market Review from October 14th, I said that I expected Becton, Dickinson ($BDX) to soon raise its dividend for the 39th year in a row. Sure enough, Becton came through and announced a 9.8% increase dividend increase on November 22nd. The new quarterly dividend is 45 cents per share and based on Thursday’s market close, BDX now yields 2.43%. There aren’t many stocks that can boast a dividend streak like Becton’s. Honestly, the stock is a bit pricey here in the low $70s. My advice is: don’t chase it. Instead, wait for a pullback below $65 before buying BDX.

    Last week, Medtronic ($MDT) reported fiscal Q2 earnings of 84 cents per share which was two cents better than estimates. This is pretty much what I expected. Two weeks ago I wrote that “they can beat by a penny or two.” I have to explain that the market has dismally low expectations for Medtronic even though the company is still doing well with pacemakers and insulin pumps. The trouble spot is Infuse, its bone growth product used in spinal fusions. Sales for Infuse dropped by 16% last quarter.

    The key for us is that Medtronic also reiterated its full-year EPS forecast of $3.43 to $3.50 per share. This means the stock is going for just over 10 times earnings. I’m raising my buy price for Medtronic to $40 per share.

    On November 22nd, Gilead Sciences ($GILD) stunned Wall Street when it announced that it’s buying Pharmasset ($VRUS) for $11 billion. That’s an insanely rich price for a company that doesn’t have any products on the market yet. (I had to reread that sentence just now after typing it. Yep, it’s still nuts.)

    So what does Pharmasset have? The company is pretty far along in developing oral drugs for hepatitis C. That could be a very lucrative market. Still, I think this was a terrible move on Gilead’s part. This is a business deal made out of fear rather than trying to spot an opportunity. Gilead was simply nervous that someone else would snatch up Pharmasset. I very much doubt that Gilead will be on our Buy List next year.

    You may have noticed that Nicholas Financial ($NICK) has been especially volatile of late. Why? I have no idea. There’s been no news. I suspect that it’s pure market jitters. Of course, it’s the market’s irrationality that helps us find bargains, so that means we have to deal with bad volatility as well. Over the last two weeks, little NICK has gone from $11.75 per share down to $10.01 and then back up to as much as $11.56 yesterday. I don’t have any more to say than “ride out the storm.” NICK is an excellent stock.

    Some other stocks on our Buy List that look attractive include Oracle ($ORCL), Moog ($MOG-A) and Ford ($F). Oracle should be coming out with its fiscal Q2 earnings in two weeks. Ford just reported a 13% sales increase for November. Also, Reynolds American ($RAI) has recently broken out to a new 52-week high. The stock is currently our top-performing stock for the year (+28%). The shares currently yield 5.37% which is equivalent to 645 Dow points.

    That’s all for now. Today is the big jobs report. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

    P.S. I’m going to unveil the 2012 Buy List on Thursday, December 15th. As usual, I’m only adding and deleting five stocks from the current list. (Low turnover is my BFF.) I won’t start tracking the new Buy List until the start of the year. I like to make the names known publicly beforehand so no one can claim I’m front-running the market somehow.

  • Nicholas Financial Earns 46 Cents Per Share
    , October 27th, 2011 at 10:45 am

    NICK just reported great fiscal Q2 earnings of 46 cents per share which was at the top of the range I gave yesterday. That’s a 39% increase over last year. For the first half of their fiscal year, NICK has made 90 cents per share. The company also said that it will pay another 10-cent dividend.

    My earlier forecast was that NICK could make as much as $1.70 per share for this calendar year. That must have seemed very optimistic when I made it but now it looks very doable. In fact, I think NICK can make $1.75 per share.

    This was an outstanding quarter. Let’s dig through some of the important numbers. Total receivables are up to $272.8 million which is a little lighter than I expected.

    The gross yield came in at 25.21% which is the highest in a year. The two bites we take out of gross yield are interest expense which was just 1.81%, the lowest on my records, and provision for credit losses which was a measly 0.26%. That line can be the earnings killer. This means that NICK’s portfolio is doing well.

    After those two are subtracted, the end result is the net yield which came in at 23.14%. That’s an increase of nearly 10% from three years ago. Out of that, we take 9.85% for costs and that gives us a pre-tax yield of 13.29%. That’s very, very good.

    Here’s a NICKs Stats with some of the performance stats for the past several quarters.

    Nicholas Financial, Inc. that for the three months ended September 30, 2011 net earnings increased 39% to $5,520,000 as compared to $3,982,000 for the three months ended September 30, 2010. Per share diluted net earnings increased 35% to $0.46 as compared to $0.34 for the three months ended September 30, 2010. Revenue increased 9% to $17,211,000 for the three months ended September 30, 2011 as compared to $15,732,000 for the three months ended September 30, 2010.

    For the six months ended September 30, 2011 net earnings increased 43% to $10,823,000 as compared to $7,558,000 for the six months ended September 30, 2010. Per share diluted net earnings increased 41% to $0.90 as compared to $0.64 for the six months ended September 30, 2010. Revenue increased 10% to $33,845,000 for the six months ended September 30, 2011 as compared to $30,684,000 for the six months ended September 30, 2010.

    “Our strong growth in earnings per share for the three and six months ended September 30, 2011 were primarily the results of an increase in the average finance receivables and a reduction in the net charge-off rate,” stated Peter L. Vosotas, Chairman and CEO. We also recently opened our 58th branch location in Huntsville, AL and continue to develop additional markets. We expect to open between 2-4 new branch locations during the remainder of our current fiscal year, which ends March 31, 2012.

    As a result of our continued earnings growth and stable capital position, the Board of Directors has voted to continue issuing a quarterly dividend equal to $.10 per common share, to be paid on December 20th to shareholders of record as of December 13th.