Friday, July 28, 2006

Shares of Advance America Plunge; Payday Loan Earnings Decrease

By J.J. Cameron
Payday Loan Writer

While Advance America may have reported strong growth last quarter, stock news tells a different story. 

Shares of the payday loan company plunged on Thursday afternoon, after the firm released the aforementioned second-quarter earnings report showing results saddled by regulatory changes and high costs.

To be exact, Advance America fell $4.54, or 25.3 percent, to $13.36. The company's shares had traded in a range of $11.58 and $18.33 in the past year.

Sure, revenue rose 4 percent to $155.9 million from $150.3 million - which is what the instant payday loan business emphasized. But analysts polled by Thomson Financial don't see as bright of a future.

The company admitted regulations in Illinois, Pennsylvania, Arkansas and Indiana are hurting earnings. Specifically, regulatory action in Pennsylvania and Arkansas reduced revenue by $9.6 million, and similar changes in Illinois and Indiana cut revenue by $4.3 million, Advance America said.

The changes included lower interest rate caps and limits on borrowing, which lower fast payday loan volumes.

"It forced Advance America and other companies to find another way to do business in those states," said Stephens Inc. analyst Dennis Telzrow.

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