goeasy (TSX:GSY) stock rose 5% in early trading on May 10 after the company reported yet another quarter of record results. It comes as investors have been interested in buying up these past growth stocks once again, with other former greats also seeing jumps in the last few weeks.
The big news, of course, was how goeasy stock would handle the recent move by the federal government regarding interest rates. So, does this recent report mean goeasy stock is now a buy?
The results are in
There was growth across the board for goeasy stock during its first quarter. Loan originations were up 29%, loan growth up 58%, and its loan portfolio up 39%. Revenue increased 24% to $287 million, with diluted earnings per share up 94% for the quarter.
The increases came across the board in everything from unsecured lending and home equity loans to automotive financing. goeasy stock also experienced stable credit and payment performance, thanks to Canadians still seeking out non-prime rates.
Operating income hit a record $102 million for the first quarter, up 28% year over year as well. Even after adjusting for expenses, it still brought in record adjusted operating income up 24% at $106 million. Net income was up 97%, with adjusted net income hitting a record $52.9 million. It was the 87th consecutive quarter of positive net income, and 19th consecutive year of paying dividends, with the ninth consecutive year of dividend increases.
Expectations versus reality
Analysts believed that goeasy stock would fall in line with their estimates, with some cutting their targets. Yet even those cuts were far higher than where shares trade today. However, goeasy stock instead came out ahead of estimates, which will likely lead to further changes from analysts as reports come in.
While analysts cut their targets before, it’s likely there will be increases in the near future. And even with those cuts, analysts maintained a buy rating for the strong stock. That’s especially likely to change, as the company discussed its three-year outlook after government changes.
Outlook looks good
goeasy stock provided an outlook for the next three years back in February. However, the Government of Canada in March introduced a new maximum allowable rate of interest annual percentage rate that could not exceed 35%.
While it remains unclear when this will come into effect, the new rule only applies to credit agreements entered after the effective date. This is a massive win, with goeasy stock holding fairly large amount of loan portfolios above the 35%. While this will have to change in the future, it won’t have to suddenly make these changes to current customers.
Still, given the new rate rule, goeasy stock came out with an updated outlook for 2023 through 2025, and it was still quite positive. It stated the company “does not expect a significant impact to its business outlook and believes the change will benefit goeasy, and those with scale, in the long term.”
Gross consumer loans remained unchanged between 2023 and 2025, with only a slight drop in expected total company revenue. This will likely impress analysts that the company will still be able to produce record results and returns on equity (ROE), even in the face of these changes.
Bottom line
So, with goeasy stock trading at $101 even after the recent boost from earnings as of writing, there is still much room to grow. The consensus price target remains at about $159, providing a potential upside of 57% as of writing. It also trades at just 12.71 times earnings. Plus, the company also boosted its dividend — one you can still bring in at a 4% yield as well.
All in all, goeasy stock remains a buy after earnings, even after shares climbed 5% after open.
