Rent Way Is No Couch Potatoby
Controversial as its business may be, Rent-Way (RWAY) is attracting some savvy investors. Shares of this little-known operator of 19 stores in Florida, Ohio, and Pennsylvania selling rent-to-own furniture have rocketed to 14, up from 9 5/8 in January. For a company that went public at 7 in 1993, that's quite a dash. And some big investors think the stock has a long way to run. What's so hot about Rent-Way or its business anyway? "Growth, growth, growth," says one New York money manager.
Indeed, Rent-Way's growth has been phenomenal. And more may be coming, thanks to its recent acquisition of McKenzie Leasing, which owns 45 rent-to-own-furniture stores in six states. That will double Rent-Way's revenues, to $45 million, says Rent-Way President and CEO Bill Morgenstern.
But more important, earnings should also more than double in 1996. Analysts figure that without the acquisition, Rent-Way's 1995 net would be 40 cents a share on estimated sales of $22 million. In 1996, with McKenzie on board, Rent-Way will make 80 cents to 90 cents a share on sales of $45 million, they figure. Based on these projections, Rent-Way shares are worth at least 25, says one analyst.
Once fragmented, this $5 billion industry is consolidating, he notes, partly because of consumer complaints about some sleazy operators. But many marginal outfits are being replaced by companies with good management and a corporate structure with standardized services, analysts say. The stores cater to low-income families that have no credit. They pay cash to rent furniture--and TVs--with an option to buy.