Is It Too Late to Buy goeasy Stock?

goeasy stock is a reasonable buy here although investors should note that in the past it has traded at larger discounts.

Kay Ng

Kay began investing in dividend stocks around 2008 via the concept of value investing. Since then, she has expanded into growth investing, including in small caps. Her passion for investing has only grown over the years! After graduating from UBC with a BSc in Computer Science, she took university courses in financial markets, finance, and financial accounting. She has contributed her works to Motley Fool, Sure Dividend, and Seeking Alpha.

Published February 14, 2024 8:15 pm EST

goeasy (TSX:GSY) stock has made tens of thousands of dollars for long-term investors with high conviction. Is it too late to buy the growth stock?

YCharts data shows that over the last decade, as an example, goeasy stock transformed an initial investment of $10,000 into approximately $136,670. This is the equivalent of a total return of about 29.9% per year – immensely outperforming the Canadian stock market return of roughly 7.9% per year in the period.

GSY and XIU Total Return Level data by YCharts

Importantly, goeasy stock’s long-term returns are supported by earnings growth. In the past 10 years, its adjusted earnings per share increased by about 28.6% per year. The stock has also paid an increasing dividend every year since 2015, which has contributed to the overall returns.

Understandably, most people don’t just magically come up with $10,000 to invest. If you only invested $5,000 initially, your investment would still have grown to a sizeable amount of about $68,340. And if you invested $1,000 at the beginning, the growth holding would be worth about $13,670 today.

That is, no matter how much you invested at the start of the decade, you would still be sitting at more than 13 times your money for the position. This shows that the important thing is to start investing in the right companies and let time and business growth to do their magic of growing your wealth.

goeasy’s business

As a leading Canadian non-prime lender, goeasy’s target market is over 9.3 million Canadians. According to the Canadian Lenders Association, this is more than a quarter of Canadians who are not eligible for credit from a traditional financial institution.

The association noted that, currently the Liberal government plans to reduce the maximum allowable interest rate to 35%, which will hit almost five million Canadians. However, the government is thinking of reducing the rate farther, which could affect the credit access of up to eight million Canadians. If this change goes through, it would not only affect non-prime borrowers who primarily use the credit to pay for essentials but also lower the customer base and earnings of non-prime lenders. Fortunately, this change would have a lesser impact on larger players like goeasy.

Is it too late to buy goeasy stock?

Management actually expects goeasy’s revenue to grow by 16 to 24% this year with normal net charge offs of 8 to 10%. Through 2026, goeasy forecasts revenue growth of almost 13% per year. Furthermore, it anticipates net charge offs to improve to 7.25-9.25% as well as returns on equity to remain steady at at least 21% through 2026.

It’s never too late to buy a good business that drives the long-term returns of its stock. However, investors should be cognizant of the value they get for the money they invest. It so happens that, over the last year, the growth stock has essentially rebounded to its long-term normal valuation. So, it’s alright to put a bit of money in goeasy stock to start building a long-term position.

Just note that in the past, market crashes have given opportunities to buy the stock on meaningful pullbacks. On those corrections, interested investors should back up the truck to enlarge their GSY holding for long-term growth potential.