Every lender has one number that tells you whether the business is healthy. For Goeasy (TSX: GSY), that number is the net charge-off rate.
Right now, it sits at an uncomfortable level, and the TSX stock is down almost 80% from all-time highs.
Here’s why I am staying away from Goeasy stock in October 2026.
Source: Getty Images
What net charge-offs mean and why Goeasy’s 16.7% matters
Sometimes a borrower stops paying, and the lender decides it will probably never get the money back. At that point, the lender writes the loan off as a loss, which is called a charge-off. So a 16.7% rate means Goeasy loses about $17 on every $100 of loans in a year, which is quite high.
According to Goeasy’s Q2 earnings call on August 7, the rate fell 110 basis points from 17.8% in Q1. It expects the charge-off rate to narrow between 14.5% and 16% in Q3.
The trouble began with LendCare, the point-of-sale lender Goeasy acquired in 2021. CEO Patrick Ens told the Scotiabank Financials Summit on September 9 that growth outran the systems behind it.
“Ultimately, our role as a company is to take the capital provided to us and lend that out and return more than it costs to get it back.”
So Ens cut LendCare originations close to zero, paused the dividend and stopped buybacks. A six-point plan followed on March 10. Direct-to-consumer loans now make up 60.3% of the portfolio, up from 53.8% a year ago.
LendCare’s own charge-off rate dropped from 26.4% to 20.6% in one quarter and leverage, measured as debt-to-adjusted tangible equity, improved to 4.95 times from 5.3 times.
Why Q2 earnings quality looks thinner than the headline
Adjusted earnings per share in Q2 came in at $1.02, a big swing from a $1.90 loss in Q1, which might seem like a turnaround.
However, originations fell 70% to $272 million, and the loan book shrank 6.8% in the quarter to $5 billion, while revenue slid 9.6% to $390 million.
A smaller book also required a smaller loss reserve, which created a $41.6 million provision release and boosted profits.
Rising insolvencies are hurting the core easyfinancial business
The healthy part of goeasy is also showing under stress.
Charge-offs on easyfinancial unsecured loans hit 17% in Q2, up from 13% a year earlier. Management blamed a shrinking book, more aged losses, and a jump in consumer insolvencies for these charge-offs. Ens said the rise matched industry data and hit older loans hardest.
Goeasy cut its growth outlook and now expects year-end loans to be broadly flat with Q2.
In Q2, the yield on consumer loans was 28.3%. In other words, GoEasy earned about $28 a year for every $100 of loans outstanding. The Q3 guidance of 26.5% to 28% points to a slightly lower figure.
Ens said the combined core business should ideally earn yields near 30% against loss rates of 12% to 13%.
What could change my mind about Goeasy stock?
Mark Snyder joined as Chief Credit Risk & Data Officer on September 8 with over 20 years in credit. Also, according to a company statement, Goeasy renewed its securitization facility with a capacity of $910 million.
The rate dropped 35 basis points to 275 basis points over CORRA (Canadian Overnight Repo Rate Average).
Goeasy stock is still a high-risk investment. The chief risk officer is leaving, while material weaknesses in financial controls are still being fixed. Moreover, the dividend stays suspended indefinitely.
I want to see Q3 charge-offs land inside the guided range, and ideally EasyFinancial losses easing. Until then, I’d rather watch than buy.
