With more than 3,300 retail locations, the Fort Worth, Texas--based company is the largest pawn store operator in the U.S. and Mexico. By Dan Victor

In the era of fintech start-ups and digital lending apps, one of the oldest forms of banking remains as relevant as ever.

Shares of pawnbroker FirstCash Holdings have surged more than 33% this year, reaching a record high after the company reported second-quarter earnings. The stock is a Buy as several tailwinds support further gains.

With more than 3,300 retail locations, the Fort Worth, Texas--based company is the largest pawn store operator in the U.S. and Mexico. This market-leading position was built over three decades through a roll-up strategy of acquiring smaller players.

Now, FirstCash is applying this expertise on a global scale with its recent acquisition of H&T Group, the largest pawnbroker in the United Kingdom. This deal marks a transformative overseas expansion, creating significant growth opportunities in the region. FirstCash describes the transaction as "meaningfully accretive" to earnings.

This move is timely, as the current economic climate strengthens FirstCash's market position. Amid a waning labor market and high interest rates, banks have tightened lending standards, effectively shutting out borrowers with low or nonexistent credit scores. For many, a pawn loan can be a lifeline, and FirstCash is capitalizing on the demand.

Speaking with Barron's, Chief Executive Officer Rick Wessel explained: "There is no doubt that we are seeing new customers, given our unique value proposition of offering small-dollar loans in quick, hassle-free transactions that take 15 minutes or less. All loans are non-recourse and don't involve credit checks or credit reporting."

The idea is simple. A customer brings in a personal item of value -- perhaps the watch on their wrist, an old necklace, or a used laptop. Within a regulated framework, a pawnbroker appraises the item and offers a small, collateral-backed loan, providing cash instantly.

This form of microlending generates two powerful revenue streams. Customers can either repay the loan with interest to reclaim their item -- at annual percentage rates that can exceed 200% -- or they can forfeit the item with no penalty, allowing FirstCash to offer the merchandise for resale.

This model is especially lucrative for jewelry, which constitutes nearly two-thirds of the company's pawn collateral. With gold and silver prices at historic highs, the greater customer borrowing power drives more store traffic and yields high-value inventory, while the company's ability to monetize forfeited items becomes even more profitable.

Second-quarter results underscore FirstCash's operating and financial momentum. Same-store pawn loan balances climbed 13% year over year in both the U.S. and Latin America, reflecting strong demand on $831 million in revenue. Adjusted earnings per share of $1.79 was up 31% from the prior year.

A welcome surprise for investors has been the performance of FirstCash's American First Finance, or AFF, segment, the point-of-sale payment solutions provider acquired in 2021. This strategic initiative into tech-driven lending with lease-to-own and "buy now, pay later" options has proven successful.

AFF's network of 15,300 active merchant locations has more than doubled since 2022. This growth is driven by diversification beyond the group's original focus on furniture retailers. The segment now serves a wider group of industries, including automotive repair and financing for elective medical procedures. Thanks to its high margins, AFF now contributes more than 20% of the firm's pretax income.

These trends are expected to continue. While not yet including the impact of the H&T acquisition, FirstCash is targeting double-digit same-store pawn sales growth this year. In the AFF segment, the company projects origination volumes will grow 20% to 25% from 2024, excluding the loss of business from two large retailers that declared bankruptcy last year. Signaling confidence, FirstCash raised its quarterly dividend by 11%, to $0.42 per share, for a 1.2% yield.

By pairing the defensive, steady cash flow of its core pawn operations with the growth opportunity of its AFF segment, FirstCash has forged a resilient, all-weather business model that supports a positive long-term outlook.

Several Wall Street analysts share a bullish conviction on FirstCash. Moshe Orenbuch at TD Cowen recently reiterated a Buy rating on the stock and raised his price target to $172, representing 24% upside from a recent $138.50. Stephens analyst Kyle Joseph also views the company favorably, describing its second-quarter results as solid and citing the performance of the "bellwether" U.S. pawn segment and accelerating growth in Latin America. Joseph also noted that AFF continues to perform well, creating "good visibility for top-line expansion" into 2026.

FirstCash's valuation is a compelling part of the investment thesis. Shares are trading at a forward price/earnings ratio of approximately 17 based on consensus 2025 earnings estimates, a multiple that drops to 14 based on 2026 forecasts. This valuation looks like a steal, as the stock has historically traded at an earnings multiple of 23 over the past decade. As the market recognizes the company's increasingly high-quality fundamentals, the stock should command a higher premium.

FirstCash faces its share of competition, including rivals like Ezcorp, a smaller U.S. pawn store specialist with about a third of its store footprint that lacks a point-of-sale financing platform or a presence in Europe. FirstCash also competes with tech-based lenders like Upstart and Affirm, increasingly vying for underbanked borrowers overlooked by traditional financial institutions. Yet, its expansive bricks-and-mortar network provides a hard-to-replicate advantage.

The primary risk to the outlook would be any future signs of market share loss, reflected in declines in indicators like same-store sales or pawn receivables, which would warrant a reassessment. Nevertheless, all signs indicate the community-based pawn model will continue to thrive.

Ultimately, FirstCash is well positioned to continue rewarding shareholders and deserves a spot in your portfolio.

The Technical View

Best-in-breed pawn stores operator trading just off its record high, following an impressive move week for the week ended 8/1 where it rose 7% into the highest weekly volume since January 2021. FirstCash is holding the break above the $136.09 double bottom pivot from 8/11 well. Look for support on the downside near $132-$133 area which would be comforted by a rising 50-day simple moving average. FirstCash could see $166 by year-end. -- Doug Busch

Write to Dan Victor at dan.victor@barrons.com

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August 22, 2025 21:31 ET (01:31 GMT)

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