Investing in the equity markets is key to building long-term wealth. Historically, stocks have generated inflation-beating returns to investors over time, despite the volatility associated with this asset class in the near term.
Several individual TSX stocks have delivered game-changing returns to investors in the past decade. For instance, a $1,000 investment in goeasy (TSX:GSY) stock in January 2014 would be worth $8,760 today. After adjusting for dividends, total returns would be closer to $11,900. Comparatively, a $1,000 investment in the TSX index would have increased to just $22,000 after adjusting for dividends.
As past returns don’t matter much to future investors, let’s see if goeasy stock should be part of your equity portfolio right now.
Is goeasy stock a good buy today?
Valued at $2.60 billion by market cap, Goeasy stock currently trades 28% below all-time highs, allowing you to buy the dip. Its pullback in share prices has increased the TSX stock’s dividend yield to 2.5%, which is not too high.
However, goeasy has raised its dividend by more than 25% annually in the past decade, increasing your effective yield significantly. Moreover, goeasy has paid a dividend for 19 consecutive years and raised the payout each year since 2015.
Goeasy is a Canada-based company offering non-prime and lending services. Its portfolio of financial products and services includes unsecured and secured installment loans as well as merchant financing through a variety of verticals and lease-to-own merchandise.
Over the years, goeasy has served 1.3 million Canadians, originating more than $12 billion in loans. Despite an uncertain macro environment, goeasy increased loan originations by 13% year over year to $641 million and loan portfolio by 33% to $3.43 billion in the third quarter (Q3) of 2023. This allowed the company to increase sales by 23% to $262 million and adjusted earnings by 29% to $3.81 per share in the quarter.
What is the average target price for GSY stock?
goeasy is part of the cyclical lending sector but continues to post double-digit growth rates, despite rising interest rates and a tepid demand environment.
It ended Q3 with $3.94 billion in total assets, rising 26% year over year primarily due to growth in goeasy’s consumer loan portfolio.
goeasy’s free cash flow from operations before net growth in gross consumer loans receivable in Q3 stood at $134 million, 40% higher than the year-ago period.
After accounting for its balance sheet cash and goeasy’s borrowing capacity, the company ended Q3 with $933 million in total liquidity.
Analysts tracking GSY stock expect sales to rise from $1 billion in 2022 to $1.47 billion in 2024. Its adjusted earnings are forecast to expand from $11.55 per share to $17 per share in this period. Priced at nine times forward earnings, GSY stock is priced at a discount to consensus price target estimates. Bay Street expects GSY stock to rise roughly 15% in the next 12 months after adjusting for dividends.
goeasy’s strong balance sheet, cheap valuation, expanding profit margins, and rising dividend payouts make the small-cap stock a top investment choice in 2024.
