Top Canadian stocks offering growth, income, and value are the smartest long-term investments for creating wealth. These stocks have strong fundamentals, promising growth prospects, sustainable earnings, and a commitment to rewarding shareholders with generous dividends. This approach typically yields above-average returns over the years.
Against this background, here is the smartest Canadian stock to buy with $5,000.
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The Smartest Canadian stock
goeasy (TSX:GSY) is one of the smartest Canadian stocks investors could consider to boost their portfolio. This sub-prime lender’s fundamentals remain solid, reflected through its strong revenue and earnings growth. Moreover, its leadership in the large subprime lending space, high-quality asset base, and strong underwriting capabilities suggest that the financial services company has ample opportunities to grow.
Thanks to its ability to grow earnings in all market conditions, GSY stock has consistently rewarded its shareholders with higher dividend payments.
It is noteworthy that goeasy’s top line increased at a compound annual growth rate (CAGR) of 20.1% in the last five years. Moreover, its earnings per share (EPS) grew at a CAGR of 28.1% during this period, outpacing revenue growth. Given its impressive financial numbers, goeasy stock has grown at a CAGR of about 35% in the last five years, delivering capital gains of over 348%.
Thanks to the company’s ability to scale profitably and maintain a solid earnings base, goeasy has consistently paid dividends for 21 years. Moreover, it has increased its dividend for 11 consecutive years.
Most recently, goeasy raised its annual dividend by 25% to $5.84 per share. Based on its annual dividend, the stock offers a dividend yield of 3.6%.
goeasy set to deliver above-average returns
goeasy will likely grow its revenue and earnings at a solid pace, driven by the continued expansion of its gross consumer loan portfolio and solid loan yields. The lender is focusing on expanding its product offerings, developing its distribution channels, and diversifying its funding sources to capitalize on Canada’s large subprime lending market. These efforts will likely drive loan originations and support its top line.
Additionally, goeasy is leveraging risk-based pricing to optimize the borrowing cost for its customers while maintaining profitability. While this move may pressure the loan yields in the short term, it is expected to stimulate demand, strengthen long-term customer loyalty, and enhance profit margins. Also, by focusing on competitive pricing and profitability, goeasy can improve its market position while ensuring sustainable growth.
With growing revenues, stable credit performance, and operational efficiencies, goeasy is well-positioned to continue to expand its earnings and margins at a double-digit rate. This will help drive its dividend payouts and share price.
goeasy stock’s lower valuation presents a buying opportunity
While goeasy is poised to deliver solid growth and return higher cash to its shareholders, its stock trades cheaply on the valuation front, presenting a solid buying opportunity. Based on its recent closing price, goeasy stock is trading at the next 12-month (NTM) price-to-earnings (P/E) ratio of just 8.4, which is too low given its strong double-digit earnings growth potential, decent dividend yield, and impressive return on equity (ROE) of 26.4%.
The bottom line
goeasy’s leadership in the subprime lending space, ability to grow its earnings at a solid pace, consistent dividend growth, and compelling valuation make it the smartest stock to buy now for creating wealth in the long term.
If you invest $5,000 in goeasy stock at its current price of around $161.07 per share, you can purchase approximately 31 shares. Over the past five years, goeasy has delivered an impressive CAGR of 35%. Even if future growth slows to a more conservative 20% annually, your $5,000 investment could still grow to about $30,595 in 10 years, more than six times your original amount.
