A few years back, the markets couldn’t get enough of goeasy (TSX: GSY). This finance stock was all the rage with interest rates high, and the stock holding rates many simply couldn’t pass up. Yet what many might not realize is that goeasy stock has been around for decades. This wasn’t some meme stock that surged upwards only to fall back; it’s a stable business that continues to demonstrate its stability. So, let’s look at why it might be the most underrated growth stock Canadian investors might be missing in their portfolios.
Source: Getty Images
About GSY
First, let’s talk about the stock itself. goeasy stock is a Canadian alternative financial services company. While it now focuses on non-prime lending and consumer financing, it started with loaning out home furniture. This is still part of its easyhome business, but goeasy stock has now expanded into easyfinancial and LenCare businesses.
Since then, it’s been expanding rapidly, with record after record during quarterly reports. During goeasy’s second quarter, the company reported loan originations of $904 million, with revenue rising 11% to $418 million, and net income hitting $86.5 million. Earnings per share (EPS) also surged, up 38% year over year. Meanwhile, return on equity (ROE) remained strong at almost 30%. This showed management continues to run a tight, financially sound ship.
Why now?
So, if goeasy stock has been around for so long, why should investors get in now? This growth stock has a few points to consider. First, the dividend. Goeasy stock currently offers a quarterly dividend of $1.46 per share, supported by solid operating cash flow. That income comes with growth, as loan volumes and customer additions continue to climb. In fact, analysts believe goeasy stock has more upside to consider.
Valuation makes this an even stronger play. The dividend stock trades at 12.6 times earnings, and forward 10 times earnings. Therefore, goeasy stock looks quite undervalued given its future outlook. The forward dividend yield of 2.8% might not sound all that high, but the dividend stock has paid one for 21 years. What’s more, it’s increased it for 11 consecutive years, making this a Dividend Knight to rely on!
Considerations
Now, nothing is perfect. goeasy stock does lend primarily to non-prime borrowers, so credit and default risks are real. Regulatory scrutiny, higher funding costs, or economic slowdowns can all put pressure on earnings. That being said, the dividend stock’s earnings show why this is a company you still don’t want to overlook.
Again, those record earnings were impressive, making this an opportunity you don’t want to miss. Canada’s non-prime lending market is estimated to be at more than $230 billion, with goeasy stock positioned to capture much of it through easyfinancial and easyhome brands. Assets were up 22% to $5.63 billion, and even with high leverage, the company is supported by strong cash flows.
Bottom line
Altogether, goeasy stock looks like a solid blend of income and growth, and a rare blend at that. It’s a Canadian stock that continues to scale out rapidly, even with the decades of history behind it. It’s a stock that continues to reward shareholders along the way. So, if you’re an investor looking for your next growth stock, but wanting stability as well, this is a dividend stock to consider on the TSX today.
