Investors opt to buy specific stocks for diverse reasons. Some may be drawn to a company’s potential for robust revenue and earnings growth, while others are attracted to stocks with attractive dividend payouts or discounted valuations. I’m buying goeasy (TSX:GSY) stock for the combination of growth, income, and value. Let’s analyze these components to understand why goeasy stands out as a compelling long-term investment.
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Track record of solid growth
goeasy is a leading non-prime lender in Canada offering unsecured and secured loans. Notably, a large subprime lending market, its diversified sources of funding, and solid credit and underwriting practices have led the company to consistently deliver stellar revenue growth and profitability.
To provide context, goeasy’s revenue has increased at a CAGR (compound annual growth rate) of 17.7% from 2012. During the same period, the financial services company’s adjusted EPS (earnings per share) grew at a CAGR of 29.5%. goeasy’s growth rate has been even better in recent years. For instance, its top and bottom line sport a CAGR of 19.62% and 31.85%, respectively, in the past five years, ending September 30, 2023.
During the first nine months of 2023, goeasy’s loan originations jumped 15% year over year to $2 billion. At the same time, its consumer loan receivable portfolio spiked 33% year over year to $3.43 billion. Impressively, goeasy’s efficiency ratio improved by 320 basis points, while its adjusted EPS registered an increase of 20%.
Looking ahead, the momentum in its business is likely to be sustained, led by solid loan origination volumes, which will drive its consumer loan portfolio and top line. Furthermore, steady credit and payment volumes and operating leverage will cushion its bottom line.
Earn steady income from goeasy stock
As goeasy’s revenue and earnings are growing rapidly, it remains committed to enhancing its shareholders’ value through increased dividend payments. The company is a Dividend Aristocrat and has been distributing a quarterly dividend for 19 years. Moreover, it has consistently raised them for the past nine years.
The company’s solid financials and ability to grow earnings swiftly position it well to boost its shareholders’ returns through higher dividend disbursements. Further, it offers a decent dividend yield of 2.8% (based on its closing price of $138.53 on December 4). This makes goeasy a compelling income stock.
goeasy stock trades at a discounted value
besides offering solid growth and income, goeasy stock appears attractive on the valuation front near the current levels. Its stock is up about 34% year to date. Despite this notable growth, goeasy stock is trading at the next 12-month price-to-earnings multiple of 8.5, much lower than its historical average of 12.2.
Further, its double-digit earnings growth and a dividend yield of 2.8% make it appear cheaper on the valuation front.
Bottom line
goeasy is a compelling stock for investors seeking growth, reliable income, and value. The company’s robust revenue and earnings underscore its ability to elevate shareholder returns. Thus, by investing in goeasy stock, investors can generate substantial wealth in the long term, coupled with the opportunity to earn a reliable income. Moreover, goeasy stock is currently trading at an attractive valuation, offering a solid entry point for investors near current levels.
