3 Reasons to Buy goeasy Stock Like There’s No Tomorrow

For investors seeking a combination of growth, income, and value, goeasy presents a compelling opportunity.

| More on:
happy woman throws cash

Source: Getty Images

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

how to save money
Investing

The Best TSX Stock for Canadians to Buy With $1,000 Right Now

iShares S&P/TSX 60 Index ETF (TSX:XIU) could be a great starter investment for new investors in Canada.

Read more »

Canadian dollars are printed
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Toronto-Dominion Bank (TSX:TD) stock could do well in the year ahead.

Read more »

monthly desk calendar
Dividend Stocks

Monthly Income: Top Dividend Stocks to Buy in November

Here are two of the best monthly dividend stocks in Canada you can buy in November 2024 and hold for…

Read more »

hand stacks coins
Investing

A Top TSX Stock to Buy Now for Real Wealth Later

Intact Financial (TSX:IFC) stock is a fantastic dividend-growth play for the next 15 years and beyond.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, November 14

The U.S. wholesale inflation data and Fed chair Jerome Powell’s remarks about the economy will remain on TSX investors’ radar…

Read more »

Man data analyze
Tech Stocks

3 Reasons Celestica Stock Is a Screaming Buy Now

These three reasons make Celestica stock a screaming buy for long-term investors.

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »