The resilience shown by the economy to interest rate cuts has supported the broader equity markets, with the Canadian benchmark index rising over 21.5% year-to-date. While several TSX stocks have appreciated significantly in value, goeasy (TSX:GSY) recently faced a sharp sell-off, eroding most of its gains.
goeasy stock has tumbled more than 24% in one month, largely due to a short-seller report from Jehoshaphat Research. The report accused the company of using accounting policies to inflate earnings and mask credit losses. In response, goeasy firmly rejected the allegations, calling them “false and malicious.” Management emphasized that the company’s consumer loan portfolio remains strong and reiterated confidence in its 2025 outlook.
While the controversy has undeniably weighed on investor sentiment, it has also created a compelling opportunity for long-term investors. With the stock trading well below recent highs, goeasy’s solid fundamentals and management confidence suggest that the sell-off could be overdone. With this background, let’s look at three reasons to consider buying this TSX stock like there’s no tomorrow.
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Reason #1: goeasy to sustain double-digit growth
goeasy is a dominant player in Canada’s subprime lending market, consistently delivering strong financial results driven by higher loan originations and operational efficiency. The financial services provider’s revenue has grown at a compound annual growth rate (CAGR) of 22.7% in the last five years. At the same time, its earnings have increased at a CAGR of 23%. The lender’s solid sales and earnings have translated into significant capital gains.
goeasy expects its consumer loan portfolio to reach between $7.35 billion and $7.75 billion by 2027, providing a solid base for revenue growth. While the average yield on loans could dip slightly, this reflects a strategic pivot toward secured lending. Further, the company’s diversified funding base and expansion into new products and markets will likely support its top line.
The leverage from higher sales, steady credit and payment performance, and operating efficiency will cushion its bottom line, leading to a double-digit increase in its earnings.
Reason #2: goeasy is a solid dividend growth stock
goeasy is set to deliver strong revenue and earnings growth, which will likely lead to a recovery in its share price. At the same time, this subprime lender is likely to return significant cash to its shareholders through higher dividend payments.
GSY stock has paid dividends for 21 consecutive years. Moreover, it has increased its annual distributions for the past 11 years in a row.
Looking ahead, goeasy’s earnings could continue to grow at a double-digit rate, giving it the capacity to keep growing its dividend. As of October 9, goeasy’s shares closed at $160.19, representing a dividend yield of 3.6%. While that yield may not be very high, its reliability and consistent growth make it a solid choice for long-term investors who seek both income and capital appreciation.
Reason #3: goeasy stock is undervalued
The recent sell-off has driven goeasy’s valuation lower despite its ability to deliver solid financials. goeasy trades at 7.9 times its expected earnings for the next 12 months. This multiple is lower than its historical average. Further, goeasy stock also looks undervalued considering its double-digit earnings growth potential and a dividend yield of 3.6%.
