QC Holdings, Inc. (QCCO): QC Holdings: Less Than Ready For Typically The Dividend…

by Shelton on September 27th, 2013

filed under Car Lending

My current stock screening in the micro-cap area raised an interesting prospect for investment, QC Holdings (QCCO).

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QC Holdings Inc. as well as its subsidiaries is usually engaged in supplying various finance (primarily short term loans) and sell used cars and earn finance charges from the associated vehicle funding contracts. The organization operates in three segments: Financial Services, Automotive and E-Lending. (Yahoo finance. yahoo. com/q/pr)

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Its fifty-two week graph shows a substantial loss of 28% in discuss value. A better look discloses that QC Holdings has endured significant quarterly earnings loss of 80% yoy and also a lack of 6. 8% quarterly income yoy. It appears as though this one could be going for the dust particles bin.

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QCCO Cash from Operations Quarterly data simply by YCharts

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However , on an optimistic note, the organization has no debt, and still contains a gross border above even just the teens and profit/net margins regarding 3%-5%. Shareholders also enjoy the roughly seven percent yield within the stock, along with a payout ratio above 65%, which is higher but is apparently sustainable at the moment. The gross has been unchanged at bucks. 05 each share considering that May 10.

It could be discussed if they need to suspend the particular dividend till they can convert their business. It is a higher yield and the like a small company could use the cash infusion to expand their business and deal with the systemic issues that appear to be plaguing these people.

There could be further difficulty later on as they stated the following inside their recent questionnaire:

Revenues declined $1. 5 million, or three or more. 6%, quarter-to-quarter, primarily as a result of lower sales in the automobile segment and reduced payday advance fees. These kinds of declines, as a result of reduced client demand plus increased competitors, were somewhat offset by simply higher charges and interest from the companys longer-term, higher-dollar installment products, which were introduced in early this year. (QC Coopération Second Quarter Results)

The company attempted to highlight its charges reducing attempts in the next paragraph:

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The first half of 2013 consists of approximately $517, 000 within severance and related costs in connection with a restructuring necessitated by decreasing loan quantities over the past couple of years as a result of moving customer need, the sluggish economy, corporate changes in addition to increasing competitors in the immediate credit business. The six-month 2012 time period includes a $739, 000 gain resulting from the amount settlement of an expiring life insurance policy. Exclusive of the particular 2013 severance and connected costs as well as the 2012 non-recurring gain, the decline inside expenses period-to-period reflects reduced salaries plus performance-based motivation compensation. (QC Holdings Second Quarter Results)

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Wage reductions, staffing ranges and bonus deals are always harmful for a business, when the business is failing to be able to execute over a proven business model (Payday financial loans and Car Lending), it seems like more of a supervision issue as compared to it is from the cost framework.

Automotive sales are having a banner year, and the inability to carry out on one in the few brilliant spots in the economy is injustificable. If they opt to blame the particular rollout of recent products from last year being a cause therefore be it. It certainly can make me feel uneasy that nearly per year after the new products are launched they are nevertheless incurring expenses from it. This particular shows not enough public fascination with what they are marketing.

Relevant Crucial Statistics

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QCCO has cratered through its 50 time moving average of $2. 64 plus 200 day time moving average of $3. 00, signaling a strong bearish trend in the stock. Nevertheless its present trading varies indicates they have reached a new bottom, becasue it is been bouncing around the $2. 60 variety for quite sometime right now.

The balance page looks healthy in the near term, and their tangible guide value ($4. 76) is usually well previously mentioned its current trading price; shares look like severely oversold or simply a new steal at these amounts.

Conclusion

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We dont suggest investing in QC Holdings at this time because the supervision team have not demonstrated a reliable strategy in the years ahead. They have not been successful within taking advantage of report auto product sales and have demonstrated poor execution from their pay day lending company.

I would keep this stock within the watch listing however to check on for indications of improvement plus an opportunity to buy it at very low levels as long as the dividend remains to be intact.

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It is a very very finely traded inventory, shares might be hard to come by in addition to hard to market.

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