It is a widely known fact that Shopify (TSX:SHOP)(NYSE:SHOP) has made its investors super-rich by delivering phenomenal returns in the past. To be precise, Shopify has generated stellar returns of about 6,020% since its initial public offering (IPO) in May 2015.
The impressive growth in the stock came on the back of its robust financial performance, positive secular industry trends, and an increase in market share.
The e-commerce giant’s strong fulfillment network, growing merchant base, the addition of high-growth sales and marketing channels, and global footprint accelerated its growth rate and pushed its stock price higher.
Though the easing of pandemic-led restrictions could moderate its growth rate, I am upbeat on Shopify. I expect the uptrend in its stock to continue in 2021 and beyond, reflecting the continued shift in selling models toward omnichannel platforms and higher e-commerce spending. However, I admit that Shopify is trading at a premium, while its high stock price could be out of reach for most investors.
Therefore, it makes sense to focus on shares that are still within investors’ reach and boast Shopify-like growth potential.
With solid growth in the backdrop, I have zeroed in on goeasy (TSX:GSY). Similar to Shopify, goeasy has delivered multi-fold returns and compounded investors’ wealth. For instance, goeasy stock has returned over 200% in one year, 981% in five years, and about 3,175% in the last decade. Let’s dig deeper to find out why the bull run in goeasy stock could continue.
Consistent financial performance
Certainly, goeasy’s outsized growth reflects its solid financial performances, accretive acquisitions, and growing sub-prime lending market. Notably, the company has consistently increased its revenues and earnings at a double-digit rate over the past two decades.
Furthermore, goeasy has rewarded its shareholders with higher dividends. It has paid dividends for 17 years and increased the same at a compound annual growth rate (CAGR) of 34% in the seven consecutive years.
Why could the rally sustain?
The company has multiple growth catalysts that could drive its stock price and dividend payouts in the coming years. I expect goeasy to continue to post double-digit growth in its top and bottom lines, reflecting an improving operating environment and a solid sub-prime lending market.
An improving credit market, increased loan originations, and solid payment volumes will likely boost its revenues and profitability. Furthermore, increased penetration of secured loans and productivity savings could cushion its earnings and drive higher dividend payments.
The company’s ability to acquire and integrate businesses, expansion of product base, higher loan ticket size, geographic growth, and addition of sales channels could further supplement its financials, and in turn, its share prices.
Overall, goeasy is in the best shape to deliver Shopify-like returns in the future and could well be a solid bet for long-term investors. The company’s market-leading competitive positioning, strong momentum in the base business, and favourable industry outlook provide a solid base for the company to handily outpace the broader markets with its returns.
Further, goeasy’s strong earnings potential indicates that it could continue to enhance shareholder value through increased dividend payments.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify.