Posts Tagged ‘nick’

  • My Forecast for Nicholas Financial’s Earnings
    , October 26th, 2011 at 3:43 pm

    Tomorrow Nicholas Financial ($NICK) is due to report earnings for their fiscal second quarter. I continue to believe this is a remarkably undervalued company.

    Let’s go over their business. NICK makes loans for the used car market. Unfortunately, investors seem to think that NICK is just another subprime lender, hence the dirt-cheap valuation.

    This view is simply incorrect. NICK is very well run and the company doesn’t dump off its loans but instead holds them to maturity.

    I have some concerns about NICK’s business but they’re not due to the quality of the company’s portfolio. That still remains very high. The issue going forward is really about growth. It’s going to get much harder for them to get originations. Competition is heating up.

    The good news, and there’s lots of it, is that NICK should still churn out the profits. The company can borrow very cheaply (LIBOR +300) and lend out at 25% or more. Receivables are running at about $270 million or so and debt is around $120 million. That should translate into revenue of roughly $17 million, give or take, for the quarter.

    By my numbers, NICK should report earnings of 44 or 46 cents per share tomorrow. That would mean the company has earned 88 to 90 cents per share in the first half of their fiscal year, and $1.66 to $1.68 for the last four quarters. That’s outstanding.

    I’ve said that NICK could earn as much as $1.70 per share for this calendar year. Now I think NICK can earn $1.75 per share for this calendar year. If so, this means that NICK is going for 5.76 times this year’s earnings which is less than half the multiple for the S&P 500.

    I think NICK is at least a $17 stock that’s currently going for $10.

    I should add that management also seems concerned about NICK’s ability to grow rapidly and that may be the reason behind the 10-cent quarterly dividend. I can’t say I’m a huge fan of it, but neither am I opposed to it. There’s nothing wrong with handing out some profits. NICK is an excellent stock.

  • Greece Gets Ready to Default
    , September 12th, 2011 at 12:20 pm

    The stock market is down yet again today. The S&P 500 got as low as 1,141.53 today so it’s still above the August 8th closing low of 1,119.46. One interesting aspect of today’s sell-off is that gold is also down today.

    The financial markets are beginning to adjust to the reality that Greece is going to default. Forbes writes: “Last week five-year Greek credit-default swaps indicated a 92% chance that the country would miss its debt payments.” This is having major spillover effects. The euro has been clobbered against the dollar and many other currencies. Now it looks like French banks are in serious trouble as Moody’s is considering downgrading them.

    The National Association for Business Economics today cuts its forecast for U.S. GDP growth. They see the economy growing by 1.7% this year and 2.3% next year. That’s down from their earlier estimates of 2.8% for this year and 3.2% for 2012.

    The Financial Sector ETF ($XLF) bounced off $12 per share. If it breaks below $12, I think it will be an outstanding buy. I also see that Nicholas Financial ($NICK) dropped below $10 per share which is less than its book value of $10.18.

  • CWS Market Review – September 2, 2011
    , September 2nd, 2011 at 7:24 am

    Continuing with my theme from last week’s CWS Market Review, the “Fear Trade” that gripped Wall Street in July and August is slowly retreating. Every investor needs to understand how this dynamic is driving trading right now.

    What’s interesting is that the stock market isn’t so much rallying on good news as it’s rallying on the lack of bad news (or lack of “bad as expected” news). That’s how scared traders are. Nor is the market really rallying as much as it’s walking back to the ground it hurriedly fled from during the jittery days of July and August. My advice to investors is to expect the Fear Trade to continue to fade. Specifically, this means that stocks will cautiously gain ground while bonds, gold and volatility will pull back.

    From Friday through Wednesday, the S&P 500 put on its first four-day win streak in nearly two months. In fact, we’re probably two good days’ rallies away from breaking above the 50-day moving average. Some of this week’s rally was due to Hurricanes Irene and Bernanke not causing as much damaged as was feared.

    We can’t say this for certain yet, but imagine if this statement turned out to be true: “The summer sell-off ended 25 days ago and we’ve already made back 40% of the money we lost.” That may turn out to be correct and it has a very good chance of doing so, but you’d never know it by listening to some of the folks out there.

    Remember that the stock market isn’t a great predictor of the economy. Since 1945, the S&P 500 has fallen 17% or more 14 times, and nine of those times have seen recessions. The bond market, however, has a better track record. Bloomberg writes, “the economy has never contracted with the difference between 10-year and 30-year Treasury yields as wide as the current 1.38 percentage points, or 138 basis points.” That’s pretty eye-opening.

    Through Wednesday, the S&P 500 posted its best eight-day gain since 2009. At one point on Wednesday, the S&P 500 got as high as 1,230.71. Thursday looked like it was going to be our fifth-straight up day until more jitters about Friday’s employment report took hold (more on that in a bit). The initial good news on Thursday was that the ISM Manufacturing Index came in at 50.6 which was better-than-expected. There were even whispers that the ISM could print as low as the mid-40s. Fear, I suppose, is contagious.

    Let me explain this a little. The ISM Index has a decent track record of aligning with recessions and expansions and we’re still well above the danger zone. The worry was that we were rapidly falling into the danger zone. Historically, the economy has done fairly well, on average, when the ISM is in this territory. I checked the numbers and found that there were 49 times when the ISM printed between 50.0 and 51.0 and only three of those months have been during official NBER recessions.

    One month ago, Wall Street was rattled by the reports on consumer spending and factory orders. However, those reports were for the month of June which is in the second quarter. Well, we already knew that the economy was sluggish during Q2, yet the bears had a field day and smacked the bulls around. Now, one month later, those two reports for July turn out to be not so bad. We learned that consumer spending rebounded by 0.8% in July, which topped expectations by 0.3%. That was the biggest jump in five months. On Wednesday, the Commerce Department reported that factory orders rose by 2.4% in July. That was the biggest increase since March. Yet the bulls are still the scared ones.

    So far, the Double Dip hypothesis has been sound and fury signifying not a whole lot. Let me be clear that I’m not saying a Double Dip won’t happen; I’m saying that the evidence proving the case, for now, is very small. At CWS Market Review, we’re guided by facts, not emotions. The good news for us is that we don’t need to predict the future with perfect accuracy to be good investors. But we do need to make reasonable judgments about the here and now.

    The fact is that the overall stock market is inexpensive. Let’s look at some numbers: Second quarter earnings for the S&P 500 came in at $24.85. That’s an 18.9% increase from one year ago. Wall Street currently expects 3Q earnings of $24.95 which is a 15.7% increase over last year. So far, we haven’t seen many companies lower guidance and this is particularly true for our Buy List stocks. In fact, they’ve been raising guidance.

    For all of 2011, Wall Street expects earnings of $98.59 for the S&P 500 (though I think $100 is possible). Since we’re already two-thirds of the way through the year, that forecast is probably pretty accurate. For 2012, Wall Street expects earnings of $112.67. Since that’s further out, we shouldn’t consider that number to be as reliable, and I think it may be too high.

    This means that going by Thursday’s close, the S&P 500 is trading at 12.22 times this year’s earnings estimate. Flip that over and you get an earnings yield of 8.19% which demolishes just about anything you can find in the frothy bond market. A ten-year T-bond is supposed to offer safety but…c’mon, is that really worth 600 basis points? I don’t think so. The Fear Trade has simply gone too far.

    The slightly better economic news comes at a crucial time for the Federal Reserve. The last FOMC meeting saw the largest dissension in two decades. The next meeting is scheduled for September 20-21. It was originally supposed to be a one-day meeting. I think the “hawks” now have the upper hand and I don’t expect another round of quantitative easing. For now.

    I’m writing this on Friday morning and Wall Street expects another dismal jobs report later today (expectations are for 70,000). I don’t blame them. However, the same dynamic is in play: traders expect to be disappointed so anything that fails to live up to that (or down to that) will be seen as good news. Be sure to check the blog to see how the August jobs report shakes out.

    As investors, we should continue to focus our attention on solid companies that are delivering steady earnings growth. Speaking of which, let’s jump to the best news of the week and that was the strong second-quarter earnings report from our Buy List member, Jos. A. Bank Clothiers ($JOSB). Three months ago, JOSB missed earnings by two cents and the stock got taken to the woodshed. This time, Wall Street was expecting 68 cents per share which I thought was on the low side. The earnings turned out to be even better than I expected. For Q2, JOSB reported earnings of 74 cents per share. Sales came in at $230.7 million which was $20 million more than consensus.

    On Wednesday, the stock gapped up as much as 11.8%. All across the board, Joey Bank’s numbers look very good. Same-store sales rose 14.7% and year-over-year direct marketing sales rose 27.8%. The company has grown its earnings for 39 of the last 40 quarters, including the last 21 quarters in a row.

    I had cautioned investors not to chase JOSB because I wanted to be certain that the company is on a firm footing. Now we have solid proof. I think JOSB can do $3.50 per share for this fiscal year. As a result, I’m raising my buy price on Jos. A. Bank Clothiers to $54 per share. This is our top-performing stock of the year, but I have to warn you that it can be highly volatile.

    I was surprised to see Nicholas Financial ($NICK) announce that it will start paying a quarterly dividend of 10 cents per share. Based on Thursday’s close, that works out to a yield of 3.78%. Not bad. If you’re a regular reader of Crossing Wall Street, you know that this is one of my favorite stocks. I think a fair price for NICK is at least $17 per share.

    I can’t say that I’m a huge fan of NICK paying a dividend, but I will say that there are many things worse that a company can do with shareholders’ money (poor acquisitions, share buybacks). You’ll never go broke cashing a dividend check, and NICK will have no trouble covering this dividend. I don’t have much faith that companies can engineer a higher share price outside of their very basic duty of delivering higher profits.

    I still believe that NICK can earn as much as $1.70 per share for this calendar year. The news that the Fed will keep rates low helps NICK, and the company just extended their credit line to $150 million. This is a really solid outfit. Nicholas Financial is an excellent buy up to $14 and it’s especially good below $11.

    Some other Buy List stocks that look particularly attractive here include Oracle ($ORCL), Reynolds American ($RAI), AFLAC ($AFL) and Wright Express ($WXS).

    That’s all for now. The market will be closed on Monday for Labor Day. I hope everyone has a restful long weekend. 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

  • Nicholas Financial Extends Credit Line
    , September 1st, 2011 at 10:30 am

    Good news.

    CLEARWATER, Fla., Sept. 1, 2011 — Nicholas Financial, Inc., announced that the Company has executed an amendment to its Bank Credit Line that increases the size of the Credit Line from $140 million to $150 million and extends the maturity date to November 30, 2013. All other terms and conditions of the Company’s Credit Line remain in effect.

    According to Peter L. Vosotas, Chairman and CEO, “We are extremely pleased that our consortium of bank lenders has agreed to increase our Credit Line and extend the maturity date. The Credit Line increase will allow us to continue our expansion strategy during the next few years. The Company is very proud to continue its lending relationship with Bank of America which began in March of 1993 and also includes Wells Fargo Preferred Capital, Capital One Bank, First Horizon Bank, and Bank of Montreal as participating banks.”

  • Nicholas Financial to Pay 10-Cent Dividend
    , August 30th, 2011 at 8:31 am

    Nicholas Financial ($NICK) just said that it’s paying a dividend:

    CLEARWATER, Fla., Aug 30, 2011 Nicholas Financial, Inc. announced today that its Board of Directors has declared a cash dividend of $.10 per share on its common stock, to be paid on September 20, 2011 to shareholders of record as of September 13, 2011.

    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 declare a cash dividend.” 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, 2011 we reported earnings of $1.41 per share. In the first quarter of our 2012 fiscal year which ended June 30, we reported earnings of $0.44 per share.

    All things being equal, I’d prefer they not pay a dividend, but I’m not strongly opposed to one, either.

    There are lots of things worse you can do with your money like share buybacks or lousy acquisitions. Ultimately, paying a dividend is a safe move. The important point is that NICK is very profitable. Ideally, I’d like to see them use every penny of cash flow to expand their business. However, the share price is very underpriced so I understand the board’s need to highlight why investing in NICK is a good thing to do.

    The best thing about a dividend is that each investor can decide if they want to purchase more shares of the company with their dividend. Nobody ever went to the poorhouse by cashing dividend checks.

    Since this is a quarterly dividend, it gives shares of NICK a yield of nearly 3.5%. That’s pretty rich and NICK will have no problem covering it.

  • More on NICK’s Earnings
    , July 27th, 2011 at 1:18 pm

    The press release is out on Nicholas Financial‘s ($NICK) earnings.

    Nicholas Financial, Inc. announced that for the three months ended June 30, 2011 net earnings increased 48% to $5,303,000 as compared to $3,576,000 for the three months ended June 30, 2010. Per share diluted net earnings increased 47% to $0.44 as compared to $0.30 for the three months ended June 30, 2010. Revenue increased 11% to $16,634,000 for the three months ended June 30, 2011 as compared to $14,952,000 for the three months ended June 30, 2010.

    “Our strong growth in earnings per share for the first quarter ended June 30, 2011 were favorably impacted by an increase in the average finance receivables and a reduction in the net charge-off rate,” stated Peter L. Vosotas, Chairman and CEO. “We recently opened our 57th branch location in Charleston, SC and continue to develop additional markets. The Company will also continue to evaluate new markets for future branch locations and we remain open to acquisitions should an opportunity present itself,” added Vosotas.

    I’m glad to see that Vosotas is open to an acquisition. I agree, but in my view, nothing less than $17 is worthwhile.

    This was a very good quarter for NICK. Here’s my spreadsheet with all the details. The company has nearly $270 million in receivables. Of that, their gross yield is 24.71%. Subtracting from that, interest expense was a little over $1.2 million. The borrowing rate was just 4.18% which is the lowest in the records I have.

    The key metric to watch is provision for credit losses which was just $73,000 last quarter. That’s a drop of over 95% from a year ago. NICK’s net yield came in at 22.76% which is the highest level in five years. Operating expenses were fairly low.

    Here’s a comparison to show you how profitable NICK is: Over the last year, interest expense has dropped by more than 20%. That’s over $300,000. Meanwhile, receivables are up by over $30 million. All these numbers add up to net income of $5.3 million which comes to 44.3 cents per share.

    Since NICK’s fiscal year ends in March, this was the report for their fiscal Q1. For comparison’s sake, let’s look at how their calendar is going. For NICK’s March quarter, they earned 40 cents per share. That means the company has earned 84 cents per share for the first six months of 2011.

    In the CWS Market Review from February 4th, I said that I wouldn’t be surprised if NICK earned $1.50 for the 2011 calendar year. That may have seemed wildly optimistic at the time, but now it looks pessimistic.

    All NICK has to do is keep doing what they’re doing, and earnings will have a good shot of topping $1.70 per share for this calendar year. That means the stock is going for seven times this year’s earnings based on yesterday’s closing price.

    One more thing to add: NICK’s low price from two-and-a-half years ago was $1.63 per share.

  • Nicholas Financial Earns 44 Cents Per Share
    , July 27th, 2011 at 9:14 am

    Another great quarter for Nicholas Financial ($NICK). The company pulled in 44 cents per share in the second quarter.

    July 27, 2011 – Clearwater, Florida – Nicholas Financial, Inc. (NASDAQ: NICK) announced that for the three months ended June 30, 2011 net earnings increased 48% to $5,303,000 as compared to $3,576,000 for the three months ended June 30, 2010. Per share diluted net earnings increased 47% to $0.44 as compared to $0.30 for the three months ended June 30, 2010. Revenue increased 11% to $16,634,000 for the three months ended June 30, 2011 as compared to $14,952,000 for the three months ended June 30, 2010.

    This is very good news. I’ll have more details as soon as they’re available.

  • Nicholas Financial Earned 40 Cents Per Share
    , May 5th, 2011 at 9:53 am

    NICK did it again. Another great quarter:

    Nicholas Financial, Inc. announced that for the three months ended March 31, 2011 net earnings increased 46% to $4,772,000 as compared to $3,260,000 for the three months ended March 31, 2010. Per share diluted net earnings increased 43% to $0.40 as compared to $0.28 for the three months ended March 31, 2010. Revenue increased 13% to $16,095,000 for the three months ended March 31, 2011 as compared to $14,256,000 for the three months ended March 31, 2010.

    For the year ended March 31, 2011, net earnings increased 55% to $16,805,000 as compared to $10,865,000 for the year ended March 31, 2010. Per share diluted net earnings increased 52% to $1.41 as compared to $0.93 for the year ended March 31, 2010. Revenue increased 11% to $62,774,000 for the year ended March 31, 2011 as compared to $56,472,000 for the year ended March 31, 2010.

    “Our strong growth in earnings per share for the fourth quarter and year ended March 31, 2011 were favorably impacted by the revenue contribution from new branches and a reduction in the net charge-off rate,” stated Peter L. Vosotas, Chairman and CEO. “We reported record revenues and earnings every quarter this year. In addition, we opened six new branch offices in the past year. We entered two new states with a branch in Chicago, Illinois and one in St. Louis, Missouri. We expect to add four to eight new branches during the upcoming year and will also continue to pursue buy-side opportunities as they arise.”

    The March quarter is the end of NICK’s fiscal year. For the year, NICK made $1.41 per share which is an increase over the 93 cents per share they made in the year before.

    Let’s add some perspective, shall we? Based on yesterday’s close, NICK is going for 9.22 times trailing earnings. That’s an earnings yield of 10.85%. Meanwhile, we know that NICK’s portfolio is vastly improving.

    For this past quarter, the provisions for credit losses were just $101,000 or 0.16% as a percentage of average finance receivables, net of unearned interest. One year ago, that was running at 3%. A year before that, it was 6%.

    Low interest rates continue to help NICK. The borrowing rate for this past quarter was just 4.21% (I believe NICK’s credit line is LIBOR plus 300 with some additional charges.)

    Here’s my updated spreadsheet with all the details.

    Optimistically, NICK can earn $1.60 to $1.70 per share for this fiscal year.

  • Afternoon Market Update
    , May 3rd, 2011 at 2:46 pm

    The stock market is pulling back again today. The pain is particularly being felt among cyclical stocks. That usually means that our stocks are outperforming the market and that’s what’s happening today.

    Energy stocks and materials stocks are down the most today. Of all the energy stocks in the S&P 500, ExxonMobil ($XOM) is down the least.

    I had mentioned that I found the market’s reaction to Becton Dickinson’s ($BDX) earnings to be baffling. Fortunately, the stock has regained its bearings and it hit a new 52-week high yesterday.

    Johnson & Johnson ($JNJ) is finally starting to creep higher. The company had a very good earnings report two weeks ago, plus it raised guidance. I didn’t realize this at the time, but I suspect that some traders were expecting an earnings miss. The shares have continued to rise which may reflect a vote of confidence for the Synthes deal.

    I’m surprised to see Moog (MOG-A) react so poorly to what I thought was a very good earnings report. If you haven’t noticed, the stock market isn’t always rational.

    Speaking of which, Nicholas Financial ($NICK) is due to report tomorrow. I’m expecting a very good earnings figure (40 cents per share). I think NICK is a $17 stock.