Shares of goeasy (TSX:GSY) have been on the mend in recent quarters, thanks in part to some better-than-feared quarters and more hope on the trajectory of the Canadian consumer. Indeed, a Canadian recession may still be in the cards, but with the Bank of Canada (BoC) potentially poised to begin cutting rates, perhaps at some point in the second half of this year, one can’t help but feel more optimistic.
Indeed, when consumers feel just a bit more optimistic about the future, they may adjust their consumption to the upside. Even though rates are still quite high, hope seems on the way. With the rise of generative and predictive artificial intelligence (AI) (potential drivers of disinflation over the long run), I think that the horrid days of inflation are drawing to a close.
Though prices still seem unacceptably high, especially at the local Canadian grocer, the days of normal, perhaps even lower, prices could be just around the corner.
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Is easy money coming again? That could spell good times for goeasy!
As consumption heats up again, it’s the consumer lending plays like goeasy that stand to benefit in a big way. Undoubtedly, goeasy stock is now up a whopping 43% over the past year alone. Despite the run, shares are still down from their all-time highs, just north of $210 per share. Today, at around $160 and change, shares of GSY go for around 11.1 times trailing price to earnings (P/E).
That’s incredibly cheap, especially if you’re in the belief that a Canadian economic recovery could be on the way as the rate cuts start to flow in again. Even if rate cuts don’t happen when we expect them, it’s the anticipation of a peak in rates that may be enough to move the needle higher on consumption.
For now, we’re in an environment that I believe bodes well for the alternative lenders. These days, rates are still high and consumers are feeling the pinch, especially those who hold mortgages. Higher monthly payments have weighed heavily on personal balance sheets.
However, things probably won’t stay like this forever, especially once rates retreat, perhaps as rapidly as they rose in recent years. With today’s budgets still constrained but with many feeling a glimmer of hope, perhaps one can justify buying more goods today with the intent of paying them off at a later date. Indeed, the stage may be set for another boom for goeasy.
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At today’s levels, I view shares as quite undervalued. The $2.66 billion mid-cap gem could be on the cusp of a boom after many years of treading water in the aftermath of the late 2021 and early 2022 bust.
The Foolish bottom line on goeasy stock
On a forward-looking basis, GSY stock looks even cheaper at around 9.6 times forward P/E. Though I’m not for chasing hot rallies, I still think GSY is worth watching and perhaps buying on a pullback toward the $130 range, a level of strong support in my books! If you’re keen, I’m not against nibbling on shares right here and today.
