Legendary investor Warren Buffett famously said, “Be greedy when others are fearful.” Few Canadian stocks embody that spirit right now better than goeasy (TSX:GSY).
With sentiment crushed, fear running high, and the share price down sharply, this non-prime lender has become one of the most compelling opportunities on the TSX. Here are three reasons investors would want to buy goeasy like there’s no tomorrow.
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1. Fear is dominating the stock — and that’s the opportunity
goeasy shares have fallen more than 40% since hitting a 52-week high in August — a staggering drop for a company with such a long history of execution.
The initial plunge began in September after a short-seller published allegations accusing the company of manipulating accounting practices to pad earnings and mask potential credit losses. goeasy rejected the claims as “false and malicious,” but the damage to investor sentiment was already done.
The weakness continued in November following the company’s third-quarter results, which showed adjusted earnings per share of $4.12 — shy of analyst expectations of $4.64. For a stock already under pressure, even a small miss was enough to trigger further selling.
Layer on top of this a cooling Canadian economy and a rising unemployment rate — key factors for any lender, especially one focused on non-prime borrowers — and you get the perfect recipe for fear-driven selling. Canada’s unemployment rate has climbed from its 2022 low of 4.9% to 6.9%, adding to investor anxiety about consumer loan performance.
But this is precisely when long-term opportunities emerge. Market fear does not distinguish between temporarily weak sentiment and permanent business deterioration. Patient investors often step in when pessimism peaks — and right now, pessimism is peaking.
2. A proven growth machine trading at clearance prices
While many investors focus on the negative headlines, they risk overlooking goeasy’s remarkable long-term track record. Over the past decade, the stock has turned a $10,000 investment into roughly $80,000, representing annualized returns near 23%. Over the same period, the company has generated an impressive average return on equity (ROE) of 23.1%.
Even more notable: during the pandemic in 2020 — a period of extreme economic stress — goeasy delivered an eye-popping 35.2% ROE. The business has repeatedly shown its ability to navigate tough environments.
Today, at under $123 per share, the stock trades at a blended price-to-earnings (P/E) ratio of about 7.7, a dramatic 35% discount to its long-term average valuation. If it merely returns to that normal level, the stock could rise 59%. And based on the current analyst consensus price target of roughly $208.90, shares have upside potential of about 70%.
In other words, this is a growth stock priced as if its best days are behind it — despite the company continuing to grow its loan book, earnings, and dividend over time.
3. A rare 4.8% dividend sweetener
Not only are shares cheap, but they currently offer a 4.8% dividend yield — more than double goeasy’s 10-year average yield of about 2.3%. The high yield is not the result of dividend risk; rather, it reflects a depressed share price.
The company has raised its dividend for 10 consecutive years, at an astonishing compound growth rate of roughly 30%. And going back to at least 2006, it has never cut its payout.
This is the kind of dividend profile investors typically pay a premium for — yet today, it’s trading at a discount.
Investor takeaway
goeasy is undeniably volatile, and investors should size their positions according to their appetite for risk. The stock could fall further before the tide turns. But for investors able to withstand short-term turbulence, the combination of fear-driven pricing, deeply discounted valuation, and a growing dividend makes goeasy one of the most attractive opportunities on the TSX today.
When sentiment finally shifts, those buying during peak pessimism could be rewarded with outsized gains.
