If I Could Only Buy 1 Stock in 2023, This Would Be it

This high-growth stock offers a healthy dividend yield and is trading at a discount.

| More on:
Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House

Image source: Getty Images

Last year, the spike in inflation to record highs and the central bank’s tight monetary policy to control it led to a correction in Canadian stocks. Though the economic situation hasn’t changed much in 2023, the substantial decline in the prices of top TSX stocks provides an opportunity for investors to add a few high-quality stocks to their portfolios. An improvement in the economy could give a significant lift to fundamentally strong stocks. 

Investors have plenty of options, given the significant correction in several top TSX stocks. However, if I could invest in only one stock in 2023, I’d invest in goeasy (TSX:GSY). 

The company offers leasing and lending services to non-prime customers. Impressively, goeasy stock has multiplied investors’ wealth and significantly outperformed the benchmark index in the past decade. GSY stock has increased at a CAGR (compound annual growth rate) of about 30% and delivered a stellar gain of approximately 1,252% in 10 years. Furthermore, it has boosted its shareholders’ returns through consistent dividend hikes.

Notably, goeasy stock has corrected in the past year on fears of an economic slowdown and the impact on its financials. While investors’ fear is warranted, the momentum in goeasy’s business has sustained, highlighting the strength of its business model. The pullback in goeasy stock and the continued strength in its financials indicate strong upside for GSY. Let’s dig deeper. 

Ongoing momentum to fuel recovery in stock

goeasy’s revenue and profitability have sported a double-digit growth rate for the past several years. The top line grew at a CAGR of approximately 16% between 2011 and 2021. Meanwhile, its adjusted net income grew at a CAGR of 33.6% during the same period. 

Despite concerns over loan originations and credit quality amidst a weak macro environment, the double-digit growth in goeasy’s revenue and earnings sustained in 2022. The lender reported revenue of $746 million in the nine months of 2022, translating into a year-over-year increase of 26%. Its solid top-line growth comes from higher loan originations led by high demand. 

During the last reported quarter (Q3), goeasy’s loan originations jumped 47%. Furthermore, its gross consumer loan receivable portfolio improved by 37%. What stands out is its stable credit quality. Its net charge-off rate came within the target range of 8.5% to 10.5%. Meanwhile, allowance for future credit losses inched down. Higher sales and stable credit quality drove 11% year-over-year growth in its bottom line. 

The benefits from omnichannel offerings and a wide product range will support its financials. Overall, the resiliency of its business, continued increase in the loan book, and steady credit performance indicate that goeasy could continue to impress with its performance.

The company’s management expects to sustain a double-digit sales growth rate. Meanwhile, operating margins are forecasted to increase by 100 basis points annually in the medium term. 

More reasons to invest in goeasy stock

Along with capital appreciation, investors can benefit from goeasy’s consistent dividend payouts. Notably, goeasy has been paying dividends for about 18 years and has increased them for eight consecutive years. goeasy stock offers a dividend yield of 3.1% and trades at a price-to-earnings multiple of 8.7, which is below the pre-COVID levels. Overall, goeasy is an attractive high-growth stock offering decent dividend yield and value at current levels. 

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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Bank Stocks

Young woman sat at laptop by a window
Bank Stocks

Could BMO Stock Be a Big Winner in 2023?

Long-term investors should take a closer look at BMO stock as a potential core holding, especially on dips.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Tech Stocks

TFSA Passive Income: How I’m Investing to Make $2,000/Year From Dividends

I am increasing my dividend income by investing in dividend stocks like the Toronto-Dominion Bank.

Read more »

Make a choice, path to success, sign
Bank Stocks

Of the Big 6 Bank Stocks: Buy This, Not That

CIBC (TSX:CM) is an interesting Big Six bank stock to buy right now.

Read more »

question marks written reminders tickets
Bank Stocks

Could BNS Stock Be a Big Winner in 2023?

Bank of Nova Scotia stock still appears oversold. Is now the right time to buy?

Read more »

Gold medal
Bank Stocks

Could TD Stock Be a Big Winner in 2023?

TD stock is still down from the 2022 highs. Is this a good time to buy?

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Is Now the Right Time to Buy Banking Stocks?

TD Bank stock is still riding high, despite the very difficult environment that it and all banking stocks are facing…

Read more »

Payday ringed on a calendar
Bank Stocks

How to Create $500 in Passive Income Each and Every Month

Combining your TFSA with a covered call ETF can create some very lucrative passive-income streams.

Read more »

woman data analyze
Bank Stocks

BNS Stock: Here’s What’s Coming in 2023

Here's what investors and market participants should look for in 2023 when it comes to Bank of Nova Scotia (TSX:BNS)…

Read more »