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5 Financial Service Small Caps With Dynamite Growth And Earnings

Few business sectors have ever had to face the wrath currently being directed at Financial Services. As demonstrators continue to take to the streets across the country, decrying Wall Street bailouts, corporate greed, and all of the foreclosures, unemployment, and other pain that they are argued to have caused, it’s an industry vilified as none in recent history. Fueled by a common animosity, and made possible largely by the real-time world of social communications, the protests represent a distance between power and the people reminiscent of the revolutionary case against King George.

And yet, as if to emphasize the disconnect, several large banks have chosen now as a good time to impose new debit card fees, perhaps as a thumb in the eye of the Obama administration and the Dodd-Frank bill passed in 2010 that restricted fees banks could charge merchants for debit card usage. It can be argued that it’s just another example of the futility of government meddling, politicians pandering for votes by slapping a law against fees only to have them pop up somewhere else, the inevitability of the free market. But it does nothing to help the already tarnished image of the nation’s money handlers.

Nevertheless, criticism doesn’t preclude successful investment, and the financial services sector still has opportunities for those with enough fortitude to accept the resentment. Below are current growth and income standouts in financial services mid-caps; companies in the $800 million to $1.5 billion range, having a net income of over $50 million, 3-year revenue growth rate of over 15%, and with a 3-year earnings growth rate exceeding 15%. Note that current earnings or revenue growth rates could be substantially different than the 3-year figures shown below. NASDAQ was the final data source used.

AmTrust Financial Services (AFSI)

AmTrust Financial Services is a multinational property and casualty insurer specializing in coverage for small to mid-sized businesses. The company considers its financial stability and success to be based on a philosophy of niche diversity and low-hazard risk, together with a reputation as an innovative technology-driven provider of insurance products. Products include Multiline Small Business Insurance, Program Business Insurance, Extended Warranty and Specialty Risk Insurance.

• Net Income: $100 million
• 3 Year Revenue Growth: 56%
• 3 Year Earnings Growth: 70%

EZCorp (EZPW)

Texas based EZCorp provides short term cash loans to individuals through consumer loan stores in the U.S. and Canada, in addition to operating pawn stores in the U.S. and Mexico. The company also has a financial interest in one of the U.K.’s biggest pawnbroking businesses, and a global cash conversion business.

• Net Income: $68 million
• 3 Year Revenue Growth: 17%
• 3 Year Earnings Growth: 55%

First Cash Financial Services (FCFS)

Texas based First Cash operates retail pawn stores, and stand-alone consumer finance stores, in the U.S. and Mexico. The company is also a 50% partner in Cash & Go, Ltd., a Texas-based limited partnership, which owns and operates credit and check cashing services in convenience store kiosks.

• Net Income: $46 million
• 3 Year Revenue Growth: 29%
• 3 Year Earnings Growth: 17%

Texas Capital Bancshares (TCBI)

Texas Capital Bancshares, headquartered in Dallas, is the parent of Texas Capital Bank, with offices in the state’s five largest metropolitan areas. The bank’s focus is commercial business with high net-worth individuals.

• Net Income: $21 million
• 3 Year Revenue Growth: 22%
• 3 Year Earnings Growth: 16%

World Acceptance (WRLD)

World Acceptance, based in South Carolina, is a major small-loan consumer finance company, with over a thousand offices covering 12 states and Mexico, offering loans, credit insurance, and other financial services to individuals.

• Net Income: $68 million
• 3 Year Revenue Growth: 17%
• 3 Year Earnings Growth: 20%

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