On Monday, Loop Capital shifted its stance on First Cash Financial (NASDAQ:FCFS) stock, upgrading from Hold to Buy and increasing the price target to $140 from $125.
The upgrade comes after what the firm considers an exaggerated selloff following the company's earnings release last week. Loop Capital highlighted the robust performance of First Cash's core US Pawn business as a key reason for the upgrade.
In addition to the business's core strength, the analyst pointed out that American First Finance (AFF), often seen as a problematic segment within FirstCash (NASDAQ:FCFS), is actually performing better than its peers in the lease-to-own (LTO) sector. Despite AFF's smaller contribution to FirstCash's overall earnings, its outperformance is notable.
The firm also emphasized FirstCash's solid free cash flow generation, which has enabled consistent returns to shareholders through cash dividends and share repurchases. These financial practices contribute to the company's appeal to investors and are a factor in the analyst's positive outlook.
The new price target of $140 implies a 21% upside potential from the stock's current levels. Loop Capital bases this target on a 19.9 times multiple of its 2024 diluted earnings per share (EPS) estimate for FirstCash. This valuation aligns with the company's historical long-term average, supporting the firm's raised expectations for the stock's performance.
InvestingPro Insights
Following Loop Capital's optimistic upgrade of First Cash Financial (NASDAQ:FCFS), InvestingPro data and insights offer additional context for investors. With a market capitalization of $5.26 billion and a solid P/E ratio of 22.37, FirstCash showcases financial stability. Notably, the company's adjusted P/E ratio for the last twelve months as of Q1 2024 stands at a slightly lower 21.04, hinting at a favorable valuation compared to earnings.
Revenue growth remains a bright spot, with a 13.9% increase over the last twelve months as of Q1 2024, demonstrating the company's ability to expand its financial footprint. Moreover, the company's gross profit margin of 61.55% underscores its efficiency in maintaining profitability. These metrics align with InvestingPro Tips that highlight the company's ability to maintain dividend payments for 9 consecutive years, suggesting a reliable return for income-focused investors.
Investors concerned about recent market movements will note that the stock has experienced a significant decline over the past week. However, the company's fundamentals, including its liquidity position where liquid assets exceed short-term obligations, may provide reassurance. For those looking for more in-depth analysis, InvestingPro offers additional tips on FirstCash, which can be accessed with a special offer. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the 6 additional InvestingPro Tips that could further inform your investment decisions.
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