I never thought that I'd be putting in a buy order for a pawn shop, but I was turned on to a couple of companies in the industry today by some blogs.  I took a look and this looks like a great buy.  The two leaders in the industry are EZPW (EZ Pawn) and CSH (Cash America) and both have pretty attractive looking businesses that look to do well when people are hurting for cash.

Here's what I look for when looking for a good company to invest in...

- Growth... I either look for a company that I believe is growing and therefore I believe it will keep the price going upward OR I look for a company that I believe will at least continue at its current level whose price is undervalued.  The theory with the latter being that at some poitn the market will realize it is undervalued and it will go up.  The ideal situation of course is a company who is both growing rapidly AND their price is undervalued (even at their current level).  Right now, with the market so down, there are a lot of companies that are both.

- Dividend... If you believe they are a stable company that will grow or at leat stay profitable and they have a good dividend... freaking awesome.  That means you're making money even if the price goes down.

- Assets versus Liablities... You want a company who has more than they owe.  You compare it as a ratio if a company has 100M in assets but owes 150M well they're ratio is 1.5 and they're in debt.  But if they only have 20M in liabilities and they only have a .2 ratio that is very attractive.  You have to understand of course that certain industries have different standards for this.... so it's relative to the industry.

- Return on Assets and Return on Equity... This is an easy way to have a good idea if the company is well-managed.  Are they making money from their investments?

- Profit Margin... the more the better obviously!  It's a little scary when it's a small margin because something minor could happen and suddenly you own a company that is losing money.

- Others... positive buzz, low P/E and Future P/E, upward trend, brand stickiness, etc etc.

So back to EZ Pawn...

They have all of the above except for the dividend.  They are growing their profits (up 30% from last year), they just acquired a large chain (Value Pawn, here in Florida), their debt is crazy low (like .16 ratio to assets), their return on assets and return on equity is over 20%, profit margin is around 12%, their P/E is under 12 (very low for a growth company!), they are a good play in a struggling economy, and finally they are a small-cap company (657M) and I need more small caps in my portfolio!

So I recommend BUY BUY BUY!  So attractive!

Related articles:

Google Finance Profile
Chasing Value:  Job loses could equal pawn shop gains (BloggingStocks)
EZCorp gobbles up stores in Florida (St. Pete Times)