FirstCash Holdings, Inc. (FCFS) stock intrinsic value fair value estimate & owner earnings analysis

FirstCash Holdings runs about 3,300 pawn stores: roughly 1,200 in the United States, more than 1,800 across Mexico, Guatemala, El Salvador and Colombia, and about 290 in the United Kingdom, added when it bought H&T Group on 14 August 2025. It also owns American First Finance (AFF), bought in December 2021, which offers lease-to-own and instalment credit at the point of sale to customers with weaker credit. In 2025 the US pawn stores earned $452.6 million before tax at the segment level, Latin America $177.4 million, the UK $52.5 million for four and a half months, and AFF $169.1 million. Pawn lending is secured by goods the customer leaves with the store. A borrower who does not repay loses the item and owes nothing more, so the company sells the item. That is why pawn profits have held up through recessions. AFF is ordinary unsecured consumer credit and carries real loss risk. How we measured earnings. FirstCash reports pawn loans, AFF finance receivables and the losses on those receivables in the investing section of its cash flow statement. Its reported operating cash flow therefore adds back the loan-loss provision without ever charging the matching write-offs. We start from operating cash flow and take out working-capital swings, stock compensation and the equipment spending needed to keep the stores running. We then deduct the credit-loss provision on finance receivables ($162.7 million in 2025), because those losses are real cash costs. Discounts that AFF earns from its merchant partners are collected in cash when a receivable is first booked but show up in earnings later, so we count that income. Premium amortisation on receivables bought with AFF in 2021-22 is a sunk purchase cost, and we leave it added back. Spending on AFF lease merchandise is treated as an operating cost. Store property purchases and acquisitions are treated as investment for growth. On this basis owner earnings per share were $3.81-$3.99 in 2018-19, $3.59 in 2020, $4.06 in 2021, $6.66 in 2022, $5.46 in 2023, $7.55 in 2024 and $9.65 in 2025 ($429.6 million). Our previous figures used a different earnings measure, so they cannot be compared with these. Anchor. The business took its current shape when AFF joined in December 2021, so we measure it from 2022 onward. Over 2022-2025, cash before lender payments (owner earnings plus about $91-134 million of cash interest) has a median of about $8.50 a share, or roughly $385 million. We split that into about $300 million from pawn and $85 million from AFF after its credit losses. The 2025 figure of about $564 million is higher. It benefited from AFF losses improving and from part of a year of H&T, and we have not raised the level to it. Owner earnings grew about 26% in 2025. Year 1 of the base case assumes 2.5% growth on the anchor, well below that. Base case, about $125 a share. Pawn earnings start at $365 million: the $300 million anchor plus about $65 million so that H&T counts for a full year at its 2025 margin, which the anchor years include only in part. They grow 2.5% a year. That growth comes from the proven way the company expands: buying small groups of pawn stores and opening new stores in Latin America every year, paid for mostly from operating cash and kept going through 2020. The large purchases are not credited as repeatable growth: Cash America in 2016, AFF in 2021 and H&T in 2025. From that growth we deduct $55 million a year for the store purchases needed to achieve it. AFF is held flat at $85 million for ten years and then fades to zero over the following ten, because we can point to no lasting advantage that keeps a subprime lending book profitable indefinitely. We credit no growth to AFF: it originated $1.02 billion in 2025, down from about $1.08 billion in 2024, with lease volumes falling 23%. After year 10, the pawn earnings continue at a flat level. That rests on more than 30 years of a licensed, collateral-backed pawn business. The business is worth about $7.8 billion. Net debt is about $2.27 billion: $2.35 billion of borrowings at 30 June 2026, less about $70 million of cash beyond what the stores need to operate. That leaves $5.5 billion for shareholders, or about $125 a share on 44.0 million diluted shares. Bear case, about $77 a share. We model one full consumer-credit downturn of the 2008-2010 kind, using what has actually happened to this type of lending in downturns. AFF earns nothing for three years as losses climb, as lease-to-own and subprime instalment lenders saw after 2008 and as AFF's own 2023 loss spike pointed to. It then recovers to only half its current level. The pawn business loses 20% for two years. That is about the drop seen in 2020, when US stimulus payments shrank pawn loan balances and our measured owner earnings fell about 10% a share, and we widen it for a sharp fall in the Mexican peso such as in 2008-09 and 2015-16. After that, pawn runs at 90% and then 95% of today's level with no growth. Leases are counted as before. We add $250 million to the debt to cover refinancing about $1.07 billion of borrowings scheduled to mature in 2028-29 at higher rates in a stressed market. The business is worth about $5.9 billion, against about $2.52 billion owed, leaving about $3.4 billion, or $77 a share. Even in the worst years of this case, cash before lender payments of about $290 million is about twice the current interest bill. Bull case, about $172 a share. Pawn earnings start at $400 million, reflecting the 2025 segment results plus a full year of H&T. They grow 4% a year, close to the pace the store network has actually achieved, with $75 million a year spent on store acquisitions. AFF starts at $110 million, its improved 2025 level, grows 2% a year, and fades to zero over 15 years after year 10. The business is worth about $9.9 billion. After $2.27 billion of debt, that leaves $7.6 billion for shareholders. Debt. The debt includes $500 million of 4.625% notes due September 2028, a $700 million US credit line due August 2029 ($559 million drawn at year-end 2025, but only $69 million at 30 June 2026), $550 million of 5.625% notes due January 2030, $500 million of 6.875% notes due March 2032, and about $115 million of UK bank debt. Lenders cap debt at 3.5 times adjusted EBITDA through 2026, falling to 3.25 times in 2027. At year-end 2025 the ratio was 2.7 times. Below that cap the room is real but limited. The 2028 notes restrict dividends and buybacks above 2.75 times, so the company is close to that line. Total borrowings were $2.35 billion at 30 June 2026 even though the credit line had been paid down. That suggests the company issued new term debt in 2026, but we could not reconcile the details from the filings available to us. Debt costs are close to market rates, so we made no adjustment for them. What could make us wrong. First, the size of AFF's losses in a real recession. AFF's history is short and comes from a mild period. Second, the Mexican peso and Mexico's rules: more than half the stores are in Latin America. Third, regulation: AFF operates under state lease-to-own and lending laws, and federal consumer-finance enforcement is in flux. The company is also a serial acquirer. Since 2020 it has spent about $1.8 billion on acquisitions and store property, and its debt grew from about $0.6 billion to $2.35 billion over the same years. Growth that is bought rather than earned has been credited only at the pace the company has proven it can sustain. Margin-of-safety price, $55. We have firm confidence in the pawn earnings. They come from collateral-backed loans with a long record, they held up through the 2020 shutdown, and stores and equipment have needed only about 2% of revenue in upkeep. We are less sure about AFF, which is about a fifth of earnings. The plausible worst outcome is a deep recession combined with a peso devaluation and tightened lending rules for AFF, with the 2028-2030 debt maturities to refinance in the middle of it. The pawn business, which is diversified across about 3,300 stores, has no customer concentration and holds hard collateral, would survive that. Shareholders would carry the cost through cut buybacks and possibly dilution. If AFF turned out to be worth nothing and pawn earnings stayed flat for good, the shares would be worth around $75-80. The price assumes a holding period of about four years. At $55 the business would be earning about 17% a year on that price, based on 2025 owner earnings of $9.65 a share, and it pays $1.60 a share in dividends in the meantime. If the shares only reached the bear-case value in three years, the implied return including dividends would be about 15% a year. If they reached the base-case value in four years, it would be well above 20%. Given the debt and the credit risk in AFF, the margin-of-safety price is no higher than $55, because above that a bad credit cycle would leave the return clearly short of 20%.