Measured Approach

EZCORP, INC. (NASDAQ: EZPW) Data as of: 11/15/2009

Industry: Retail (Specialty Non-Apparel)

Current Data
Current Price $14.43 PEG 0.2
Market Cap ($M) $711.25 EPS TTM ($) 1.42
Shares Outstanding (M) 49.2 P/E TTM 10.2X
Institutional Holdings % 75.6 EPS Estimated 2010 ($) 1.66
Insider Holdings % 21.8 P/Estimated EPS 8.7X
Beta 1.04 MA Value ($) 16.65
Latest Quarter Reported 09/30/2009 Price Value Ratio 0.87

EZCORP (EZPW) – Fast Growth, Solid Profits, Low Price

EZCorp offers pawn loans in 294 U.S.-based pawn shops and at 38 Mexico pawn shops.
The company also sells forfeited collateral from its pawn shop operations. In 477
EZMONEY stores and 71 of its pawn shops, EZPW offers short-term, non-collateralized
loans (pay-day loans.)

HIGHLIGHTS

 EZCORP Inc. (EZPW) reported net income of $20.9 million or $0.42 per share for
the fourth quarter, compared to $16.0 million or $0.37 per share in the prior
year quarter. Total Revenues for the fourth quarter increased 34% to $164.8
million from $123.4 million in the previous year quarter.

 For the trailing twelve month period ending 09/30/09, EPS was $1.44. Consensus
estimate for FY10 is $1.66.

 The company announced that it has completed its acquisition of 108.22 million
newly issued ordinary shares of Cash Converters International Limited,
headquartered in Perth, Australia. EZCORP paid AUS $0.50 per share, for a total
investment of AUS $54.11 million or about US$49.4 million U.S., and now owns
about 30% of the outstanding ordinary shares of Cash Converters. The Cash
Converters shares are listed on the Australian Stock Exchange and the London
Stock Exchange (symbol, "CCVU"). EZCORP funded the investment primarily with
cash on hand and expects the investment to be immediately accretive to
earnings.

 The PE ratio relative to the average 3-year, 5-year and 7-year EPS growth rate is
0.25X

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© Copyright 2009 Ronald Sommer. All Rights Reserved.
Analysis of the Balance Sheet

The schedule presented below shows the year-end balance sheets for the years
between September 30, 2004 and September 30, 2009. Accounts receivable and
inventory comprise approximately 72 percent of the business’s current assets.
Approximately 16 percent of current assets are cash. The company reports no short-
term investments.

Fixed assets (net property, plant and equipment) make up approximately 24 percent of
the business’s non-current assets. As the company’s revenues have increased, the fixed
assets also have risen.

Overall, the business’s total assets have approximately tripled during the period
presented below. The increase in total assets has been due primarily to increases in
accounts receivable and secondarily to increases in inventory and other current assets.

Accounts payable comprise the largest segment of current liabilities. They comprise
approximately 70 percent of current liabilities. The company carries a modest amount of
short term and long term debt.

As the company’s earnings steadily increased, so did its equity. The company increased
equity by approximately 166% during the period presented.

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© Copyright 2009 Ronald Sommer. All Rights Reserved.
 Balance Sheet
(Amounts in Millions)
TTM FYE FYE FYE FYE FYE
Assets 09/30/09 09/30/08 09/30/07 09/30/06 09/30/05 09/30/04
Cash 44.8 27.4 22.5 29.9 4.2 2.5
ST Investments 0.0 0.0 0.0 0.0 0.0 0.0
Accounts Receivable 136.0 101.2 81.7 65.4 67.3 66.5
Inventory 64.0 43.2 37.9 35.6 30.3 30.6
Other Current Assets 32.6 20.0 15.1 11.1 12.5 12.0
Total Current Assets 277.4 191.9 157.2 142.0 114.3 111.7
Net Property,Plant & Equip. 51.2 40.1 33.8 29.4 27.0 25.8
LT Investments 38.9 38.4 35.7 19.3 17.3 17.6
Goodwill/Intangibles 100.7 26.7 17.1 0.8 0.0 0.0
Other LT Assets 24.4 11.6 7.3 6.4 6.9 9.2
Total Assets 492.5 308.7 251.2 197.9 165.4 164.3

Liabilities
Accounts Payable 33.8 5.7 6.2 22.6 19.0 14.9
Short Term Debt 10.0 0.0 0.0 0.0 0.0 0.0
Other Current Liabilities 4.7 26.3 26.2 1.9 2.3 3.7
Total Current Liabilities 48.6 32.0 32.4 24.5 21.3 18.6
LT Debt 25.0 0.0 0.0 0.0 7.0 25.0
Other LT Liabilities 3.2 3.7 2.9 3.2 3.6 4.0
Total Liabilities 76.8 35.7 35.3 27.7 31.9 47.6
Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Common Stock Equity 415.7 273.1 215.9 170.1 133.5 116.7
Total Liabilities & Equity 492.5 308.8 251.2 197.8 165.4 164.3
Book Value Per Share 8.65 6.30 5.26 4.31 3.58 3.17

Analysis of the Income Statement

As part of my analysis, I analyzed EZPW’s income statements for the years ended
September 30, 2004 through September 30, 2009.

Revenues have increased from $227.8 million for the year ending September 30, 2004
to $597.5 million in the year ending September 30, 2009. During this period, gross
profit margins remained fairly steady ranging from 61.3 percent to 69.5 percent. The
result is a near tripling of gross profit dollars for the year ending September 30, 2009 as
compared to September 30, 2004.

Operating expenses as a percentage of sales have declined over the years. For the year
ending September 30, 2004, operating expenses as a percentage of sales was 93.7
percent. Operating expenses as a percent of sales declined to 83 percent in the year
ending September 30, 2009.

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© Copyright 2009 Ronald Sommer. All Rights Reserved.
 Income Statement
Amounts in Millions
TTM FYE FYE FYE FYE FYE
09/30/09 09/30/08 09/30/07 09/30/06 09/30/05 09/30/04
Sales 597.5 457.4 372.2 315.9 254.2
Cost of Goods Sold 203.6 139.4 118.0 106.9 90.7
Gross Income 393.9 318.0 254.2 209.0 163.5
Depreciation & Amortization 12.7 12.4 9.8 8.6 8.1
Research/Development n/a n/a n/a n/a n/a
Interest Expense n/a n/a n/a n/a n/a
Unusual Expenses/(Income) 0.0 0.0 0.0 0.0 0.0
Total Operating Expenses 496.0 383.7 316.7 272.9 231.9
Operating Income 101.5 73.7 55.5 43.0 22.3
Interest Expense - Non-Op. 1.4 0.4 0.3 0.4 1.5
Other Expenses/(Income) (5.2) (4.8) (4.7) (2.9) (2.3)
Pretax Income 105.3 78.1 59.9 45.5 23.1
Income Taxes 36.8 25.6 22.1 16.2 8.3
Income After Taxes 68.5 52.4 37.9 29.3 14.8
Adjustments to Income 0.0 0.0 0.0 0.0
Income for Primary EPS 68.5 52.4 37.9 29.3 14.8
Nonrecurring Items 0.0 0.0 0.0 0.0 0.0
Net Income 38.5 52.4 37.9 29.3 14.8
EPS Basic 1.42 1.21 0.92 0.74 0.40
EPS Diluted 1.42 1.21 0.88 0.69 0.36

Industry Comparative Analysis

EZCORP is identifies with the Retail (Specialty Non-Apparel) industry group. This is a
diverse group of companies operating in very different segments of the service industry.
Direct comparisons are difficult.

The following schedule presents a comparative ratio analysis of EZCORP and the median
company classified as Retail (Specialty Non-Apparel). Four categories of ratios
(profitability, liquidity, debt management and asset management) have been used to
compare the operating results of EZPW with that of the industry. EZPW has been
compared to the median ratio for the Retail (Specialty Non-Apparel) industry.

Liquidity ratios give an indication of a company’s ability to meet current obligations with
the use of current assets. As indicated by the comparative ratio analysis, EZPW liquidity
ratios are adequate to meet its current obligations and signify financial strength.

The profitability ratios measure management’s effectiveness in overseeing the

business’s resources. Compared to the industry median, EZPW is more effective than
the industry in producing earnings from its assets.

All in all, EZPW presents a strong showing when compared to the industry median.

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© Copyright 2009 Ronald Sommer. All Rights Reserved.
 Industry Comparative Analysis

Industry Industry
PROFITABILITY Company Median LIQUIDITY Company Median
Gross Profit 65.9 34.3 Quick ratio 4.4 0.6
Operating Margin 17.0 (2.4) Current Ratio 5.7 1.5
Net Profit Margin 11.4 (1.1) Payout Ratio 0.0 0.0
Return on Equity 17.6 0.0 Times Interest Earned 71.2 (1.3)
Return on Assets 14.5 (2.4)

Industry Industry
DEBT MANAGEMENT Company Median ASSET MANAGEMENT Company Median
Total Liab. / Total Assets 15.6 61.5 Receivables Turnover 4.8 32.1
LT Debt / Equity 6.0 12.4 Asset Turnover 1.3 1.8
LT Debt / Capital 5.7 14.2 Inventory Turnover 3.4 3.4

Summary of Analysis

Based on my analysis of EZCORP, the business appears to be in a strong financial

position. During the years presented here, both sales and earnings have increased
significantly as well as its equity position. In addition, compared to the industry, EZCORP
has more liquidity, less leverage, and operates more profitably. Based on the financial
analysis of EZCORP, the business has less risk than does the median company in the
Retail (Specialty Non-Apparel) industry.

Value Conclusion

Based on my analysis of the common stock of EZCORP, Inc., I conclude the fair market
value of EZPW to be $16.65 per share. This represents a 10X multiple to consensus
estimated EPS of $1.66 for FY10 and 11.7X multiple to FY09 EPS of $1.42.

Valuation Ratios

Current Industry
Company MA Value Median
Price Earnings 10.20 11.73 14.60
PE to Growth 0.20 0.29 1.30
Price to Book 1.70 1.92 1.60
Price to Sales 1.10 1.37 0.40
Price to Cash Flow 8.50 9.85 12.20
Price to Free Cash Flow 12.20 14.11 8.70

Disclosure: Author is long EZPW.

Please visit http://measuredapproach.wordpress.com for important disclosures.

© Copyright 2009 Ronald Sommer. All Rights Reserved.