goeasy (TSX:GSY) has been punished brutally in recent months, falling 39% over the last three months and landing squarely on the list of the TSX’s worst performers.
Yet despite the sharp sell-off, the long-term picture tells a remarkably different story. This is a stock that has compounded shareholder wealth at an astonishing 23% annually over the past decade — enough to turn every $10,000 invested into nearly $80,000.
When a company with that track record suddenly trades at fire-sale prices, investors should take notice.
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A business built for high risk — and high reward
goeasy’s business is not for the faint of heart. As a non-prime consumer lender, it serves borrowers traditional banks often avoid. Over the years, the company has widened its reach across multiple lending channels and products, including home-equity loans, point-of-sale financing, and lease-to-own household goods. This diversified approach has helped the company grow while managing risk in a segment where credit quality can change quickly.
To understand the risk profile, consider goeasy’s target net charge-off rate — essentially the percentage of loans it expects will never be collected. Management aims for a rate of 8.75% to 9.75%, and through the first nine months of the year, the company delivered an 8.8% rate, right within expectations.
These levels would be catastrophic for a bank, but for goeasy, they are built into the model. The company prices its loans accordingly, which is why it can absorb losses and still consistently generate meaningful profit.
This brings us to one of goeasy’s most impressive metrics: return on equity (ROE). Recently, the company posted an ROE of roughly 19%, a powerful signal that it converts shareholder capital into profit with exceptional efficiency.
Even more intriguing, this level of performance is not a fluke. Over the past decade, goeasy’s average ROE sits at 23%, with a median of 20% — a rare combination of stability and profitability in a high-risk lending niche.
A track record of explosive growth
Strong ROE has translated into outstanding growth across the business. Over the past 10 years, goeasy increased its diluted earnings per share by nearly 27% annually. That level of compounding would be impressive for a software company; for a financial services firm, it’s exceptional.
This earnings surge has also supported one of Canada’s most aggressive dividend-growth stories. The company has raised its dividend at an eye-popping pace of 30% per year over the last decade.
Now, the recent stock decline has created an unexpected gift for income investors. The dividend yield has jumped to 4.6%, double the company’s 10-year average yield of 2.3%. That alone signals unusually attractive value, but the story gets better. At roughly $126 per share, the dividend stock trades at just 7.7 times blended earnings — representing a hefty 35% discount to its long-term normal valuation.
Why this sell-off looks like a rare opportunity
With a high yield, a deeply compressed valuation, and a management team that has proven its ability to grow through economic cycles, goeasy now sits in one of the most compelling risk-reward positions it has offered in years.
For investors with high risk tolerance — and the patience to weather short-term volatility — the current setup could pave the way for a powerful multi-year recovery. Over the next three to five years, today’s beaten-down price may well look like a screaming buy.
