Valued at $2.88 billion by market cap, goeasy (TSX:GSY) has created significant wealth for long-term shareholders. In the last 20 years, goeasy stock has returned 1,340% to investors. However, if we adjust for dividend reinvestments, cumulative returns are closer to 2,340%.
It’s evident that goeasy has crushed broader market returns over time primarily due to strong revenue and earnings growth. In the last 10 years, goeasy has increased its sales and earnings at a compound annual growth rate of 14% and 29.4%, respectively.
While goeasy has delivered inflation-beating returns to investors, historical performance does not matter much to current or future investors. So, let’s see if GSY stock can continue to surge in 2025 and beyond.
Is goeasy stock a good buy right now?
goeasy is part of the cyclical financial lending sector. For instance, lending firms perform well during periods of economic expansion due to strong employment rates, lower lending rates, and sustainable delinquency rates. However, during recessions, financial services companies, including goeasy, will struggle with higher loan defaults, lower demand for loans across verticals, and a narrowing earnings base.
goeasy provides non-prime leasing and lending services to Canadian consumers. Its two primary business segments include easyfinancial and easyhome. The easyfinancial business provides unsecured and real estate-secured installment loans, personal loans, home equity lines of credit, auto loans, and others. Its easyhome segment leases household furniture, appliances, electronics, computers, and more.
With more than 300 locations across Canada, goeasy has a presence in the largest cities in the country. Despite a challenging macro environment this year, in the third quarter (Q3) of 2024, goeasy increased
- Loan originations by 16% to $839 million;
- Loan portfolio by 28% to $4.4 billion;
- Sales by 19% to $383 million;
- Operating income by 25% to $163 million; and
- Adjusted earnings by 13% to $4.32 per share.
goeasy emphasized that credit applications in Q3 rose by 22% to 645,000 while its customer base widened by 14% to 48,600. The average branch loan portfolio grew 18% to $6.6 million, while quarterly auto financing volumes exceeded $150 million for the first time in the September quarter.
Is GSY stock still undervalued?
With $1.8 billion in total funding capacity and $700 million in additional debt issuance, goeasy is well-capitalized. Additionally, goeasy stated that it has the capacity to grow its loan book by $300 million, which would be funded entirely from its internal cash flow.
Analysts tracking GSY stock expect adjusted earnings to grow from $14.2 in 2023 to $16.7 in 2024 and $20 in 2025. So, priced at 8.5 times forward earnings, GSY stock is cheap, given its strong growth forecasts. Bay Street remains and expects the TSX stock to gain over 35% in the next 12 months.
A widening earnings base has allowed goeasy to raise dividends multiple times over the past two decades. Today, it pays shareholders an annual dividend of $4.68 per share, indicating a yield of 2.7%. These payouts have risen from $0.11 per share in 2004.
goeasy continues to execute well across multiple fronts, with strong growth balanced by stable credit metrics and improved operational efficiency. The company appears well-capitalized for future growth with multiple funding sources and strong cash flow generation.
