When planning your long-term investment strategy, say for 20 years, Canadian stocks that offer growth potential, consistent income, and solid value should be at the forefront of your considerations. This approach will enhance your returns and lay the foundation for building substantial wealth over time.
Moreover, it’s important to focus on stocks with strong fundamentals, sustainable earnings, and the ability to return higher cash through dividends and buybacks. These characteristics typically translate into above-average returns over the years.
Against this background, goeasy (TSX:GSY) is the only TSX stock I’d buy and hold for the next 20 years.
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Why goeasy?
goeasy is a Canadian financial services company known for lending to subprime borrowers. It has consistently outperformed the broader market index with its returns. In the last five years, goeasy stock has spiked over 233%, increasing at a compounded annual growth rate (CAGR) of about 27.2%.
The subprime lender’s stellar gains reflect its ability to rapidly expand its revenue and earnings, and return higher cash to its shareholders. goeasy’s top line has increased at a CAGR of 19.6% in the last five years (as of March 31, 2025). Moreover, its earnings per share (EPS) grew at a CAGR of 25.8% during this period, outpacing revenue growth.
Beyond capital gains, goeasy has also been generous with its shareholders. The company has paid dividends for 21 years straight and increased its payouts for 11 consecutive years. The stock currently offers a decent dividend yield of over 4%.
In summary, goeasy offers solid growth and an income opportunity in the long term.
goeasy set to deliver above-average returns
The company’s leadership in Canada’s large subprime lending market, high-quality asset base, strong performance across its customer acquisition channels, and solid underwriting capabilities suggest that goeasy has ample room for growth.
goeasy is poised to grow its revenue and earnings at a double-digit rate, driven by the steady expansion of its consumer loan portfolio and maintenance of attractive loan yields. By 2027, goeasy aims to grow its loan book to $7.4 billion and $7.8 billion. This target is backed by rising demand in the subprime segment and goeasy’s strong market position.
The company is broadening its product offerings and expanding its distribution channels to support this growth. The subprime lender is diversifying its funding sources, ensuring a steady flow of capital to support new loan originations. These efforts will help boost goeasy’s top-line growth and strengthen its leadership in the market.
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 bolster demand, strengthen long-term customer loyalty, and boost margins. Also, the company is focusing on competitive pricing and profitability, which will improve goeasy’s market positioning while ensuring sustainable growth.
The growing revenues, stable credit performance, and operational efficiencies will likely help goeasy to continue expanding its earnings, driving its dividend payouts and share price.
goeasy stock’s lower valuation presents a buying opportunity
While goeasy is poised to deliver solid growth, its stock trades cheap on the valuation front. Based on its closing price on May 12, GSY stock trades at the next 12-month (NTM) price-to-earnings (P/E) ratio of just 7.5. This NTM P/E is relatively low for a company with strong double-digit earnings growth potential, a solid dividend yield, and a projected return on equity of around 23%.
The bottom line
goeasy’s leadership in the subprime lending space, ability to grow its earnings at a double-digit rate, consistent dividend growth, and compelling valuation make it a smart bet for the next 20 years.
