More on NICK’s Earnings

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.

Posted by on July 27th, 2011 at 1:18 pm

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