Over the last few years, one of the most exciting stocks on the TSX has been goeasy (TSX:GSY), the impressive financial growth stock.
goeasy is a financial lender that primarily offers loans to consumers with below-prime credit scores, who otherwise are unable to get loans with traditional banks.
This is a higher-risk business, but it’s also an industry that has significant growth and profitability potential for companies that can manage and mitigate that risk, like goeasy.
In fact, goeasy has such an impressive and consistent track record that it’s easily one of the best stocks to buy and hold for the long haul.
For example, when you include dividends, goeasy has earned investors a total return of 352% in the last five years. That’s a compounded annual growth rate (CAGR) of more than 35.1%. And that even includes the selloff it experienced in the second half of 2021 and early 2022.
So, if you had invested just $1,000 in goeasy five years ago, your investment would be worth over $4,500 today.
However, even after this impressive rally, today, the stock still trades roughly 15% below its all-time high, despite being at a 52-week high.
And the good news for investors is that while goeasy isn’t as cheap as it was this time last year, it’s still relatively undervalued, plus it has massive growth potential.
So, if you’re impressed by goeasy’s performance or have been thinking of adding it to your portfolio, here’s what to consider first and whether or not it’s a top stock to buy now.
Despite its impressive rally, goeasy stock still has massive growth potential
goeasy’s significant and consistent growth dates back even longer than five years. However, despite the impressive results it’s earned to date, it’s still a relatively small company at a market cap of just $2.7 billion, giving it a ton of potential to continue expanding its operations.
Furthermore, despite the economic environment, goeasy has continued to perform well, showing investors exactly why it’s one of the highest-quality Canadian stocks on the TSX.
In fact, on Tuesday this week, goeasy reported its fourth-quarter earnings, and unsurprisingly, the stock reacted with a more than 12% rally on Wednesday.
First off, goeasy reported quarterly loan originations of $705 million, which was up 12% from $632 million in the same quarter last year. In addition, its total loan portfolio value is now $3.65 billion, up 30% from $2.79 billion.
One of the most notable figures for goeasy stock, though, was its net charge-off rate (the rate at which it writes off delinquent loans). For the fourth quarter, goeasy’s charge-off rate was again within its target range at 8.8%. More importantly, though, it was actually down 20 basis points.
The increased revenue and loan generations, coupled with fewer bad debts, boosted goeasy’s adjusted earnings per share (EPS) for the fourth quarter to $4.01, up 32% from $3.05 last year.
And to put the cherry on top of another quarter and year of impressive growth, goeasy also increased its dividend again, this time by 22% to $4.68. This marks the 20th straight year goeasy has paid a dividend and the 10th straight year with a dividend increase.
goeasy’s fourth-quarter results show the company is firing on all cylinders
These are impressive results for goeasy in general. But they are especially impressive given the expectations the market had for goeasy and the economy as a whole.
One of the main reasons why the stock had been out of favour for so long and even traded below $100 a share last spring was that investors were concerned about the impacts a weakening economy would have on goeasy, specifically its charge-off rate.
So, the fact that its charge-offs are still in its target range, and have actually declined shows what an incredible job goeasy stock has done of managing its loan book and mitigating risks.
Plus, looking forward, analysts expect the rapid growth to continue, with another 19% revenue growth and a 17.5% increase in adjusted EPS estimated in 2024.
Therefore, while you can buy the stock below its all-time high, it certainly still offers attractive value for long-term investors.
