goeasy (TSX:GSY) has been one of the hottest TSX stocks, consistently outperforming the broader equity markets with its returns. For instance, shares of this subprime lender have gained about 73% over the past year. Moreover, goeasy’s stock price has grown at a compound annual growth rate (CAGR) of more than 30% in the last five years, delivering capital gains of nearly 276%. In comparison, the S&P/TSX Composite Index has gained about 25% and 50% in one and five years, respectively.
While goeasy stock has appreciated significantly, there are three compelling reasons to buy goeasy stock like there’s no tomorrow. Let’s dig deeper.
goeasy stock has significant growth potential
goeasy has cemented its position as a leader in Canada’s non-prime lending space, offering a range of financial products from unsecured and secured loans to lease-to-own merchandise. Its appeal to non-prime borrowers has fueled steady growth, expanding its footprint across the country.
Over the past decade, goeasy has consistently delivered impressive financial results. goeasy’s revenue grew at a CAGR of 19% from 2013 to 2023, while adjusted earnings per share (EPS) skyrocketed by 28.6% annually over the same period. And the momentum hasn’t slowed – goeasy posted a 25% revenue increase and a 24% rise in adjusted EPS for the first half of 2024.
Looking ahead, the company is positioned to keep growing. Its wide product range, expanding geographic reach, and diversified funding sources will likely drive even stronger revenue growth. Plus, with strong credit underwriting, stable payment performance, and improved operational efficiency, goeasy’s earnings are expected to continue growing at double-digit rates. This growth will likely push the stock price higher, offering more upside for investors.
Consistent dividend growth
Besides solid growth, goeasy stock offers steady dividend income. The subprime lender was included in the S&P/TSX Canadian Dividend Aristocrats Index in February 2020 thanks to its impressive track record of dividend growth. Between 2015 and 2020, goeasy’s dividend grew at a CAGR of 42%. Fast forward to 2023, the company had already increased its dividend by over 113%, paying out $0.96 per share.
But goeasy didn’t stop there. On February 14, 2024, the company announced another dividend hike, raising its quarterly payout by 21.9% to $1.17 per share.
Overall, goeasy has consistently raised its dividend for 10 consecutive years and is on track to maintain this streak.
The company is leveraging risk-based pricing to lower its customers’ borrowing costs while extending the lifespan of its customer relationships. Over time, this should result in a gradual reduction in net charge-offs and an increase in profit margins. As a result, investors can expect to see further earnings growth, which will drive future dividend payments.
Attractive valuation
Despite its impressive rise in value, goeasy stock still offers excellent value at current levels. goeasy’s next 12-month price-to-earnings multiple is 10.1, well below its historical average. Further, with a dividend yield of 2.5%, an impressive return on equity (ROE) of over 21%, and double-digit earnings growth ahead, goeasy stock looks undervalued at current levels.
Bottom line
For investors seeking a combination of growth, income, and value, goeasy presents a compelling opportunity. With its strong market position, steady financial performance, and commitment to growing dividends, now may be the perfect time to add goeasy stock to your portfolio.
