An economy defined by persistent inflation and tight consumer credit conditions has provided the perfect backdrop for pawnshops to thrive.

In the year since we recommended buying shares of FirstCash Holdings, the stock has returned 61%, outperforming the 35% gain in the small-cap focused Russell 2000 Index. While we advocate keeping expectations somewhat more grounded going forward, we still think the stock is worth holding on to for more upside into 2027.

The Fort Worth, Texas-based pawnbroker, which operates more than 3,300 stores across the U.S., Latin America, and U.K., is firing on all cylinders. The company last reported quarterly earnings on July 23, surpassing both top- and bottom-line Wall Street expectations.

Revenue of $1.1 billion climbed by 29% year over year, while adjusted earnings of $2.50 per share was 40% higher than the prior-year quarter. Consolidated pawn receivables, representing the total value of outstanding pawn loans owed to the company, rose 22% on a same-store basis over the prior year. Part of that increase reflects the appreciation of precious metals that have made common pawn items such as jewelry and luxury watches more valuable.

When a customer brings an item to a pawnshop, the store issues a short-term cash loan secured by that collateral, earning fees and interest. If the customer decides not to return for the item, they have the option to forfeit the loan balance, allowing FirstCash to take ownership of the item and resell it at its retail locations. In its earnings press release, management noted that pawn demand "remains extremely robust."

Part of our bullish thesis last year was that the company's acquisition of H&T, recognized as the U.K.'s largest pawnbroker, marked a new phase of growth and provided an entryway into the European market. By all accounts, the deal has been a success with both total and same-store pawn receivables up 26% compared with pre-acquisition levels a year ago. H&T now contributes approximately 13% of total consolidated pretax operating income.

In June, FirstCash took another step in its U.K. expansion, announcing the acquisition of privately held Ramsdens Holdings, a pawn operator in the region that has a portfolio of 174 pawn locations. In a statement to Barron's, FirstCash CEO Rick Wessel described the thinking behind the deal: "Ramsdens stronger presence in northern England and Scotland, combined with H&T's greater representation in southern England and the limited geographic overlap between the two networks, made Ramsdens the logical and highly complementary next step in building broader nationwide coverage."

That strategy of rolling up smaller operators to consolidate market share has served FirstCash well in its 35 years as a publicly traded company. In the highly fragmented pawn landscapes across its core U.S., Latin America, and now European market, FirstCash brings a unique ability to integrate, and scale operators with its significant capital resources, technology infrastructure and retail expertise that independent dealers struggle to match. "That combination creates a durable, multiyear runway for continued consolidation and organic growth." Wessel says.

Wall Street is onboard, with four out of five analysts tracked by FactSet rating FirstCash as a buy (the fifth rates it a hold). Stephens analyst Kyle Joseph, whom we cited in our original article, maintains an overweight rating on the stock with a current fair value estimate of $250, implying a 14% upside from the current level. In his latest note, he cites the Ramsdens deal as highly accretive with the company "set up for ongoing growth and the potential for multiple expansion." Joseph forecasts FirstCash to achieve full year adjusted EPS of $12.85 by 2027, implying a 1-year forward price to earnings ratio of 19x at his price target.

In our view, the stock continues to offer strong growth at a reasonable price backed by solid fundamentals. With a current quarterly dividend of $0.42 per share, the stock yields 0.8% and has increased its payout annually each year since 2016. The company has also been active with buybacks. In July, FirstCash announced a new $150 million share repurchase authorization, adding to more than $772 million in stock repurchased since 2021.

Overall, there are plenty of reasons to stay bullish.

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