goeasy (TSX:GSY) stock has been one of those growth stocks that just refuses to drop. Despite coming down from all-time highs, the company has seen strong results that have led to even stronger share growth. As of writing, shares of goeasy stock are up 43% in the last year and 57% since dropping during October.
Yet before you get back into it, shares have also come down slightly since earnings. So, let’s look at what three points investors should consider before buying goeasy stock.
Strong results
Recent results showed that goeasy stock is still pumping out loans and seeing even more growth. goeasy stock reported an impressive fourth quarter as well as full-year results, with loan originations and portfolio growth as well as increased profitability.
Loan originations grew by 12% year over year to $705 million, with the loan portfolio up 30%. The stock maintained a stable credit performance and record quarterly and annual earnings per share at $4.34 and $14.48, respectively. What’s more, it bumped the dividend by a whopping 22% to $4.68 per share.
The company also provided a new three-year forecast, which showed its confidence in continued growth. It now believes it can target a loan portfolio of $6 billion by 2026. And this would certainly suggest that the share price should go up right along with it.
Even so…
This is all great news, certainly. However, we cannot deny that there are still risks with an economic downturn to consider. While goeasy stock might be optimistic, the company itself even acknowledged the possibility of a mild to moderate recession in Canada over the next two years.
This could lead to higher loan defaults and would be reflected in the company’s net charge-off rates. These rates are the percentage of a lender’s loan portfolio that is considered uncollectible and written off as a loss. At just 8.8%, goeasy stock is looking great right now. But that could change.
A poor economic scenario could also lead to lower loan originations and that could certainly hurt profitability further. So, investors should consider the overall economic outlook before investing in this non-prime lender.
Analysts weigh in
Yet, for now, analysts are bullish on the future of goeasy stock, especially after strong earnings as well as its increased future outlook. In fact, many believe the stock will continue to outperform, and indeed raised their target prices.
Analysts will need to continue watching potential regulatory changes. The upcoming legislation limiting interest rates to 35% annual percentage rate (APR) could affect profitability in the long run, though goeasy stock has denied this would happen and welcomes the change.
Overall, goeasy stock at this rate looks like a solid long-term buy. It offers a dividend yield at 2.92% and trades at just 11.2 times earnings. Shares have also come down since 52-week highs, providing a nice bump — especially as it heads towards the consensus price target of $203 as of writing. This would give investors a potential upside of about 25% as of writing.
