Editor’s note: A previous version of this article incorrectly stated that Duncan Hannah would be goeasy’s new chief executive officer (CEO).
goeasy (TSX:GSY) hasn’t had an easy time recently after the stock experienced a notable drop in its stock price, plummeting from its 52-week highs. The decline followed a significant leadership change that sparked investor uncertainty.
Yet despite this setback, there are compelling reasons to consider goeasy stock as a strong investment opportunity. Here, we delve into the reasons behind the stock’s decline and explore why it remains a solid investment choice.
Leadership change
The primary catalyst for goeasy’s recent stock decline was the resignation of its long-time CEO, Jason Mullins. Under Mullins’ leadership, goeasy saw remarkable growth, expanding its product offerings and geographical reach. His unexpected departure led to immediate investor concerns about the continuity of the company’s strategic direction.
Investors often react negatively to sudden leadership changes, especially when a well-regarded CEO steps down, reflecting concerns about the company’s future stability and strategic consistency.
The stock market’s reaction to the leadership transition was swift, with goeasy’s stock price declining by 9%. This response is typical in scenarios where investor confidence is shaken by unexpected changes at the top. The uncertainty surrounding how new leadership will impact the company’s operations and strategic direction contributed to the selloff.
Same strong business
Despite the recent dip, goeasy stock has a robust track record of financial performance. The company’s revenue growth has been impressive, driven by its focus on non-prime consumer lending and leasing. In the last fiscal year, goeasy reported revenue of $849 million, up from $725 million the previous year, showcasing its ability to grow even in challenging economic conditions.
Earnings have also been solid, with a net income of $157 million, demonstrating the profitability of its business model. goeasy stock’s return on equity (ROE) stands at an impressive 26.8%, highlighting its efficiency in generating profits from shareholders’ equity.
From a valuation perspective, goeasy remains attractive. The recent price drop has made its stock more affordable, with a price-to-earnings (P/E) ratio of around 12, compared to the industry average of 15. This suggests that the stock is undervalued relative to its peers, providing an attractive entry point for investors.
Moreover, goeasy offers a dividend yield of approximately 2.61%, providing income in addition to potential capital gains. The company’s commitment to returning value to shareholders through dividends further enhances its appeal as an investment.
Bottom line
While goeasy’s stock experienced a significant decline following the leadership change, the company’s strong financial performance, robust business model, and potential for growth under new leadership make it a compelling investment opportunity. The market’s initial reaction may have created an attractive entry point for investors looking for a solid company with a proven track record and promising future prospects. As goeasy continues to adapt and grow, it remains a strong contender in the non-prime consumer lending and leasing market.
