goeasy (TSX:GSY) is a Canadian alternative financial services provider specializing in leasing and lending solutions for subprime customers. The company’s stock has come under pressure in recent weeks following a report from Jehoshaphat Research, which accused the Mississauga-based firm of using aggressive accounting practices to overstate its earnings.
According to the report, goeasy allegedly employed questionable methods to delay the recognition of credit losses and understate delinquencies. Meanwhile, goeasy has firmly denied these claims, calling the report false and malicious. Nonetheless, the controversy has shaken investor confidence, causing the stock to fall by over 22% from its September highs. Let’s examine goeasy’s recent performance and long-term growth prospects to see if this pullback presents a potential buying opportunity.
goeasy’s historical performance
From the launch of its lending services in 2006, goeasy took 13 years to expand its loan portfolio to $1 billion by August 2019. However, over the past six years, the company has expanded its loan portfolio to $5.1 billion by broadening its product offerings to serve the entire non-prime credit market and enhancing its omnichannel distribution network.
These expansion initiatives have strengthened its financial performance, with revenue and diluted earnings per share (EPS) rising at impressive annualized rates of 19.4% and 27.6%, respectively, over the 10 years. Maintaining this momentum, the company reported a 10% year-over-year increase in revenue to $810.2 million in the first six months of this year, while diluted EPS grew by 4.3%. On the back of this solid financial performance, the company has delivered returns of over 1200% in the last 10 years at an annualized rate of 29.3%.
Moreover, the subprime lender has also rewarded its shareholders by paying dividends for 21 consecutive years. It has also raised its dividend at an impressive rate of 29.5% over the last 11 years and currently offers a healthy dividend yield of 3.5%. Now, let’s look at its growth prospects.
goeasy’s growth prospects
Over the past five years, the Canadian subprime lending market has expanded at a CAGR of 4.2%, reaching $231 billion by the end of 2024. Despite its strong performance over the last decade, goeasy currently holds only about 2% of this market, indicating significant room for growth. With its broadened product portfolio, strategic initiatives, and rising market penetration, the company is well-positioned to capture a larger share of the market and further enhance its financial performance.
Earlier this year, the Canadian government reduced the maximum allowable annual percentage rate (APR) to 35%. goeasy has successfully lowered its weighted average annual interest rate from 40% in 2019 to 27.9% in the second quarter of 2025. The company is implementing additional measures to further reduce its weighted average annual interest rate, which could help attract more customers and expand its loan portfolio.
In addition to these growth initiatives, the company has implemented advanced modelling and analytical techniques to identify emerging trends and areas of opportunity or concern. These measures can enhance the quality of its lending decisions and, in turn, strengthen profitability. On the back of these growth prospects, goeasy projects its loan portfolio to be between $7.35 billion and $7.75 billion, with the midpoint representing a 48% increase from its current levels. Additionally, management expects its topline to grow at an annualized rate of 11.4% through 2027, while delivering a return on equity of over 23% annually. Therefore, its growth prospects look healthy.
Investors’ takeaway
The recent pullback has dragged goeasy’s valuation down, with its NTM (next 12 months) price-to-sales and NTM price-to-earnings ratios now at 1.5 and 8.2, respectively. Considering its cheaper valuation, healthier growth prospects, and consistent dividend growth, I believe goeasy offers attractive buying opportunities at these levels despite the near-term volatility.
