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Why EZCORP Inc. Stock is Rocketing Today

What: Shares of EZCORP Inc (NASDAQ: EZPW) are up more than 13% as of 3:25 p.m. EST Tuesday.

So what: EZCORP shares are rising after the company announced that it would seek to sell its Grupo Finmart subsidiary in its first quarter earnings report. Grupo Finmart makes installment loans to employees of various Mexican employers.

EZCORP reported a net loss of $74.1 million or $1.35 per diluted share in the first quarter of 2016. Notably, much of the loss is the result of a $73.9 million charge from Grupo Finmart, the Mexican lending unit that EZCORP is putting up on the auction block.

The company's core pawn shop business improved by many measures. In the United States, EZCORP's pawn business saw an 8% increase in pawn service charges, and a 5% percentage point improvement in gross margins from merchandise sales year over year.

Its considerably smaller Mexican pawn business saw a 5% increase in pawn service charges, and a three percentage point improvement in gross margins from merchandise sales compared to the year-ago period.

Now what: The market seems to like the company's efforts to divest from Grupo Finmart, and further focus on its improving U.S. and Mexico pawn business. Grupo Finmart has been a money loser for years, producing segment losses of $22.2 million and $19.1 million in 2015 and 2014. Finding a new owner for the Mexico lending unit may help the results of its improving pawn operations shine through, resulting in a higher valuation from Wall Street. 

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