If you’re seeking to build substantial wealth over the long term, some of the most rewarding opportunities lie in TSX-listed stocks that consistently deliver strong total returns. One hot stock in this category is goeasy (TSX:GSY), a company that has consistently delivered solid capital gains and reliable dividend income.
goeasy operates in the subprime lending space, offering financing solutions to non-prime borrowers across Canada. While that might sound risky at first glance, the financial services company has a well-managed and disciplined approach to credit underwriting, which has translated into impressive financial performance over the years. goeasy has been one of the TSX’s hidden gems, consistently outperforming broader markets.
Despite its strong fundamentals and history of growth, the stock remains undervalued, providing a buying opportunity.
With its combination of capital growth potential, steady income through dividends and an attractive valuation, goeasy offers three compelling reasons to buy its stock like there’s no tomorrow. Let’s dig deeper.
Source: Getty Images
goeasy offers solid growth potential
goeasy is a leader in Canada’s non-prime consumer lending space. Its dominant positioning, product expansion, and omnichannel offerings enable the company to capitalize on this large and underserved market, supporting its growth.
For instance, goeasy has been growing its revenue at a compound annual growth rate (CAGR) of 19.6% over the past five years. Strong revenue growth and operating efficiency have led to a significant expansion in its bottom line, which has increased at a CAGR of 25.8% during the same period.
Its stock has followed suit, surging over 288% in five years, growing at a CAGR of more than 31%, far outpacing the broader market.
Looking ahead, goeasy’s growth story appears far from over. It is well-positioned to benefit from rising credit demand in the non-prime segment. Its expanding customer base, high-quality loan book, and strong underwriting set the stage for continued earnings growth.
goeasy aims to grow its consumer loan portfolio to between $7.35 billion and $7.75 billion by 2027. This will be driven by increasing credit demand and strategic initiatives such as diversifying its product suite, broadening distribution channels, and enhancing funding sources. Moreover, its risk-based pricing will likely improve customer retention and lower credit risk.
In summary, goeasy could deliver solid double-digit revenue and earnings growth, which will likely push its share price higher.
goeasy will continue to hike its dividend
Besides delivering market-beating capital gains, goeasy is also a dependable income-generating investment. The subprime lender has a solid track record when it comes to rewarding its shareholders, having paid dividends for 21 consecutive years. It has increased its dividends every year for the past 11 years and is well-positioned to continue hiking its dividend.
Its earnings are growing at a healthy double-digit pace, giving the company the financial muscle to support and extend its dividend increases well into the future. Investors can also count on its decent current yield of 3.4%, based on the stock’s closing price of $171.50 on July 14.
goeasy stock is a bargain buy right now
Despite goeasy’s impressive financial performances, its shares remain undervalued. As of the close on July 14, the stock was trading at a next 12 months (NTM) price-to-earnings (P/E) multiple of 8.9 times.
What makes this especially compelling is the strength of goeasy’s fundamentals. The company has been delivering robust double-digit earnings growth. Add to that a healthy dividend yield and an expected return on equity of around 23%, and you’re looking at a stock offering solid growth, income, and efficiency, all at a discount.
The bottom line
goeasy is a compelling long-term investment on the TSX, offering strong growth potential, growing income, and attractive valuation. With its proven ability to deliver market-beating returns, consistent dividend hikes, and disciplined credit management, goeasy is well-positioned for solid growth.
