If you’re searching for an undervalued Canadian stock with the potential to transform long-term investors into millionaires, goeasy (TSX:GSY) deserves a closer look — even if the market appears terrified of it right now.
The stock has plunged close to 40% from its highs near $216 per share, and for many investors, that kind of drop is enough to shut the door immediately. But as any seasoned investor knows, sometimes the most lucrative opportunities are hidden behind volatility that scares everyone else away.
What’s happening now isn’t new for goeasy. After soaring to about $218 per share in 2021, it collapsed more than 50% to roughly $96 in 2022. For investors in this non-prime lender, volatility is normal — it’s practically part of the business model. These declines represent the downside risk. But the upside? That’s where the story gets compelling.
Over the past decade, even with those gut-wrenching swings, goeasy still turned into an eight-bagger, compounding at more than 23% annually. Few companies on the TSX can claim that kind of long-term wealth-creating power.
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High risk, high reward — and still growing
Of course, the risk is real. goeasy’s customers are borrowers with non-prime credit profiles, and as a result, the company’s net charge-off rate was 8.8% for the first nine months of the year. Management actually expects a charge-off range between 8.75% and 9.75%, underscoring that elevated loan losses are simply part of the business.
Despite a challenging environment — one that includes higher interest rates and rising household financial stress — goeasy continues to grow.
Revenue climbed 12% to $1.3 billion, pointing to resilient demand. Operating income rose 6.2% to $472.2 million, though income before taxes fell 24% due to a steep rise in finance costs. Those costs surged 63% to $251 million, driven by higher borrowing expenses and increased credit losses. As a result, diluted earnings per share (EPS) slid 21% to $9.47.
Yet even with these pressures, goeasy still delivered a robust 17.7% return on equity (ROE) — solidly in double-digit territory and a sign of operational efficiency.
On an adjusted basis, the picture looks even better: year-to-date adjusted ROE of 22% and adjusted diluted EPS of $11.76, only 4% lower than last year.
A rare valuation — and a possible launchpad for wealth
goeasy isn’t a stock for conservative investors. But for those with patience — and the stomach for risk and volatility — the current setup is intriguing. With shares trading around $132, the stock sits roughly 40% below its highs and sports a blended price-to-earnings (P/E) ratio of just 7.9. That’s about a 33% discount to its long-term valuation.
And then there’s the dividend: a 4.4% yield, raised annually for the past decade, with a payout ratio of roughly 40% — leaving ample cushion to protect the dividend.
If you want a sense of what long-term ownership can deliver, consider this: A $124,000 investment in goeasy 10 years ago would be worth about $1 million today.
Investor takeaway
Of course, no investor should rely on a single stock to achieve millionaire status. But within a diversified portfolio, goeasy offers the rare combination of strong historical returns, attractive valuation, and substantial long-term upside potential.
For investors willing to embrace risk, this beaten-down lender could indeed be one of the most compelling undervalued Canadian stocks today — and possibly, your ticket to million-dollar wealth.
