goeasy (TSX:GSY) stock has gained nearly 92% over the past year. While shares of this financial services company have appreciated significantly, there are compelling reasons to buy goeasy stock as if there’s no tomorrow. In this article, I’ll discuss three reasons that make goeasy a must-own Canadian stock.
Before I dig deeper, investors should note that goeasy offers leasing and lending services to subprime borrowers. Operating under three distinct brands — easyfinancial, easyhome, and LendCare — the company provides a range of financial solutions, including unsecured and secured loans, lease-to-own services, and point-of-sale financing, including buy-now-pay-later options.
goeasy’s success stems from its ability to consistently grow its revenue and earnings at a solid pace. Investors should note that goeasy’s revenue and adjusted earnings per share (EPS) have grown at a compound annual growth rate (CAGR) of 19% and 28.6% between 2013 and 2023.
The company’s performance has been even better in recent years, which indicates that goeasy’s sales and EPS growth rate have accelerated. For instance, over the past five years (ending March 31, 2024), goeasy’s revenue has risen at a CAGR of 20.03%. Meanwhile, its EPS grew at a CAGR of 32.2%.
Thanks to its solid financials, goeasy stock has registered notable growth, making its investors rich. goeasy stock has surged by nearly 1,111% over the past decade, reflecting a CAGR of over 28%. Moreover, in the last five years, the stock experienced a CAGR of about 31.6%, generating an impressive total return of about 296%.
With this background, let’s look at three things that make goeasy an attractive investment.
Market dominance and solid growth potential
goeasy is a leader in Canada’s subprime lending market. Thanks to its omnichannel offerings, wide product range, geographical expansion, and diversified funding sources, goeasy is poised to capitalize on the large non-prime lending market.
goeasy’s leadership highlighted during the recent quarterly conference call that the company is witnessing solid momentum across its several products and acquisition channels, including unsecured lending and automotive financing.
The increase in loan originations will likely drive its loan portfolio and revenue growth. Solid revenue growth, stable credit and payment performance (showcasing goeasy’s ability to manage credit risk effectively), and improving operating efficiency will likely lead to stellar earnings growth and drive its share price.
goeasy stock offers high dividend growth
Thanks to its solid fundamentals and strong earnings base, goeasy has consistently increased its dividend rapidly, making it a compelling investment for income investors. It’s worth highlighting that goeasy became part of the S&P/TSX Canadian Dividend Aristocrats Index in February 2020 as it increased its dividend at a CAGR of 42% over the prior five years.
Since 2020, goeasy’s dividend increased by about 113% to $0.96 in 2023. Furthermore, this financial services company increased the quarterly dividend to $1.17 per share, up 21.9% from $0.96 in February 2024. This marked goeasy’s 10 consecutive years of dividend growth.
goeasy’s valuation is attractive
goeasy stock has appreciated quite a lot over the past year. Nonetheless, the stock is trading at an attractive valuation. It is trading at the next 12-month price-to-earnings multiple of 10, which is lower than its historical average. Moreover, it appears low considering goeasy’s solid double-digit earnings-growth rate and a dividend yield of 2.6%.
Bottom line
goeasy’s ability to grow its revenue and earnings at a double-digit rate, focus on enhancing shareholders’ return with high dividend growth, and compelling valuation make goeasy a buy near the current levels.
