The spinoff would allow Cash America to shift focus to its storefront pawn lending operations. The company has not yet made a decision, but the spinoff would create a separate publicly-traded company with approximately $766 in revenue as of Dec. 31.
Should a spinoff occur, Enova would own and operate the online lending business in the U.S., U.K., Australia and Canada, while Cash America International would own and operate the more than 1,000 storefront lending businesses in the U.S. and Mexico. David Fisher has been Enova's CEO since Jan. 2013 and would continue to serve in that capacity.
"As independent companies, both Cash America and Enova would be better positioned to focus on their industry-specific business strategies and the regulatory environments related to the specific products each company offers," CEO Daniel Feehan said in a statement.
Cash America also increased its first-quarter earnings per share guidance to a range of $1.50 to $1.55 from $1.25. This new range is well above the Capital IQ consensus estimate of $1.21 a share.
The stock was up 8.7% to $41.85 at 11:55 a.m.
Separately, TheStreet Ratings team rates CASH AMERICA INTL INC as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CASH AMERICA INTL INC (CSH) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins, impressive record of earnings per share growth and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 4.27, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for CASH AMERICA INTL INC is rather high; currently it is at 56.55%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.68% trails the industry average.
- CASH AMERICA INTL INC has improved earnings per share by 15.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CASH AMERICA INTL INC increased its bottom line by earning $4.64 versus $3.40 in the prior year. For the next year, the market is expecting a contraction of 7.3% in earnings ($4.30 versus $4.64).
- CSH, with its decline in revenue, slightly underperformed the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: CSH Ratings Report