The stock market had a hard time during the last year or so. But, of course, this came after immense growth during the pandemic. Some growth stocks surged in share price, even doubling, becoming some of the best investments at the time.
But then, the market started to drop. Stocks fuelled by the pandemic turned around, as investors wanted their returns with inflation and interest rates rising.
Yet today is a different story. We could certainly see another dip in the market, that’s true. However, inflation seems to be getting under control. Furthermore, interest rate hikes are nearing their end. With that in mind, it could very well be a great time to pick up goeasy (TSX:GSY) stock once more.
Why goeasy rose and fell
goeasy stock rose during the pandemic as its loan originations surged. The company has been around for decades but recently saw a huge increase in interest as it offered lower interest rates when Canadians wanted to buy new homes.
However, goeasy stock started to drop as interest rates rose. The fear came that the company simply wouldn’t do well in a high interest rate environment. That loan originations would drop, leading to the company falling backwards rather than pushing forwards.
Yet only half of this was true. While shares of goeasy stock dropped almost 60% from peak to trough, this wasn’t due to the company’s poor performance.
Record earnings
In fact, goeasy stock has been putting out record after record of strong earnings reports. This included its most recent earnings report for the second quarter. goeasy stock reported record loan originations of $667 million, an increase of 6% over last year. As interest rates climb, goeasy stock has actually seen an increase in strong demand, leading to a “record volume of applications for credit.” These were up 25% over the last year.
In fact, its loan portfolio growth of $210 million far surpassed its forecasted range between $175 and $200 million for the quarter. By the end of the second quarter, its consumer loan portfolio hit a record $3.2 billion, up 35% from 2022 levels. This led to an increase in revenue as well, hitting a record of $303 million up 20% for the quarter over last year.
Meanwhile, payments and credit remained stable, showing that the company isn’t fearful about the future of its loan repayments. And yet shares dropped after earnings, down 7% since its release.
What’s next?
goeasy stock may be down from before its earnings report, but overall, it’s been doing much better. Shares are up 40% since hitting lows a few months back and could continue to double in price from those lows. Meanwhile, it’s now in value territory as well. Shares trade at just 11.6 times earnings and 1.91 times sales.
The company’s dividend also looks strong at 3.01%, which is higher than the five-year average of 2.93%. Overall, you’re getting a great deal on a strong long-term stock that’s blown up once and could certainly do it again — especially when interest rates get back under control and we enter a bull market once more.
