If you’re on the hunt for a Canadian stock with strong fundamentals and solid growth potential, look no further than goeasy(TSX: GSY), as there are solid reasons to buy it as if there’s no tomorrow. Over the past two decades, goeasy has established itself as a powerhouse in the subprime lending sector, consistently outperforming the broader market averages with its returns and making its investors rich.
This financial services company operates under three brands—easyfinancial, easy home, and LendCare—offering a wide range of financial solutions tailored primarily for subprime borrowers. These include unsecured and secured loans, lease-to-own services, and the popular buy-now-pay-later service.
The company’s financial track record speaks volumes. Between 2013 and 2023, goeasy achieved a compound annual growth rate (CAGR) of 19% in revenue. At the same time, its adjusted earnings per share (EPS) grew at a CAGR of an impressive 28.6%. So far, 2024 has seen even stronger performance, with revenue growing by 25% in the first six months. Meanwhile, its adjusted EPS increased by 24% during the same period.
Thanks to its stellar performance, goeasy’s shareholders have reaped significant rewards. For instance, goeasy stock has surged by a staggering 868% over the past decade, delivering an average annualized return of about 25.5%. Moreover, goeasy has delivered an average ROE (Return on Equity) of 26.4% in the last five years and enhanced its shareholders’ value through higher dividend payments.
Against this backdrop, let’s explore two reasons to buy goeasy stock like there’s no tomorrow.
# Reason Number 1 to buy goeasy stock
Even though goeasy stock has appreciated quite a lot, it offers significant value near the current price levels, and its valuation looks highly attractive. goeasy’s next 12-month price-to-earnings multiple is 9.8, notably lower than its historical average. Moreover, the valuation appears compelling considering its solid double-digit earnings-growth potential, a dividend yield of 2.6%, and ROE of over 21%.
As a leader in Canada’s subprime lending sector, goeasy is well-positioned to capitalize on a large and growing addressable market. Its broad product portfolio, omnichannel approach, expanding geographic presence, and diversified funding sources provide solid tailwinds for future growth. These factors are expected to drive an increase in the company’s loan portfolio and boost overall revenues in the coming years.
goeasy is experiencing strong momentum across its key products and acquisition channels, particularly in unsecured lending and automotive financing. Additionally, the company’s solid credit underwriting capabilities, stable credit and payment performance, and enhanced operational efficiency will likely contribute to earnings growth and drive its share price higher.
# Reason Number 2 to buy goeasy stock
Besides offering value and growth, goeasy is a solid income stock due to its impressive track record of dividend payments. The company has consistently grown its dividend at an amazing rate, driven by its solid earnings performance. Given its solid payout history, goeasy has earned a place in the S&P/TSX Canadian Dividend Aristocrats Index in February 2020. Notably, goeasy increased its dividend at a CAGR of 42% in the prior five years before becoming part of the Dividend Aristocrats Index.
Since joining the index in 2020, goeasy has continued to reward shareholders handsomely. Its dividend has grown by 113%, reaching $0.96 per share in 2023. Further, in February 2024, goeasy raised its quarterly dividend by 21.9%, bringing it to $1.17 per share. This marked the company’s 10th consecutive year of dividend increases, making it a reliable choice for income-focused investors.
Bottom line
With a solid history of revenue and earnings growth, rising dividends, low valuation, and a leading position in the subprime lending sector, goeasy is poised to deliver stellar returns in the long run, making it a top choice for investors seeking value and income.
