Thursday, March 6, 2014

Staying Away From This PayDay QC Holdings, Inc - QCCO

I started watching QCCO back in January when it showed up on one of my stock screens. They have restructured and sold off business units in the past few years, which has reduced the market cap of this company considerably. I decided not to invest back in January when QCCO was trading for around $2/share - and the stock shot up to around $2.80 not long after.

Recently QC Holdings reported year end results in an 8-K filing. Here are the results in a nutshell:

Revenue: $152.0 million (+ $3.1m YoY)

Branch Operating Costs: $63.9 million (+ $700,000 YoY)
Loan Losses: $44.4 million (+ $11.7m YoY)
Other Expenses: $819,00
Corporate Expenses: $28.6m (- ~$5.4m YoY)

I still feel the risks are too great to invest in QCCO at this time.

#1 Competition run deep in this area of financing.

#2 The company cannot issue any dividends until September 2014 at the earliest.

#3 While unlikely, the Missouri Lending Charges Limits Initiative ballot measure still has until May 14, 2014 to collect enough signatures to land it on the November ballot. QC Holdings largest concentration of income comes from the state of Missouri. Additionally, I am familiar with some of the properties they operate in California - and they don't have a market leading presence in those areas.

In conclusion, QC Holdings remains on our speculative stock watchlist, however I will wait until legislation landscape in Missouri clears and the company nears a possible dividend reinstatement. During this time the company might strengthen ongoing business operations, creating a more attractive trade in the future.

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