Investing in the equity markets is key to building long-term wealth. Historically, stocks have generated inflation-beating returns to investors over time, despite the volatility associated with this asset class in the near term.
Several individual TSX stocks have delivered game-changing returns to investors in the past decade. For instance, a $1,000 investment in goeasy (TSX:GSY) stock in January 2014 would be worth $8,760 today. After adjusting for dividends, total returns would be closer to $11,900. Comparatively, a $1,000 investment in the TSX index would have increased to just $22,000 after adjusting for dividends.
As past returns don’t matter much to future investors, let’s see if goeasy stock should be part of your equity portfolio right now.
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Is goeasy stock a good buy today?
Valued at $2.60 billion by market cap, Goeasy stock currently trades 28% below all-time highs, allowing you to buy the dip. Its pullback in share prices has increased the TSX stock’s dividend yield to 2.5%, which is not too high.
However, goeasy has raised its dividend by more than 25% annually in the past decade, increasing your effective yield significantly. Moreover, goeasy has paid a dividend for 19 consecutive years and raised the payout each year since 2015.
Goeasy is a Canada-based company offering non-prime and lending services. Its portfolio of financial products and services includes unsecured and secured installment loans as well as merchant financing through a variety of verticals and lease-to-own merchandise.
Over the years, goeasy has served 1.3 million Canadians, originating more than $12 billion in loans. Despite an uncertain macro environment, goeasy increased loan originations by 13% year over year to $641 million and loan portfolio by 33% to $3.43 billion in the third quarter (Q3) of 2023. This allowed the company to increase sales by 23% to $262 million and adjusted earnings by 29% to $3.81 per share in the quarter.
What is the average target price for GSY stock?
goeasy is part of the cyclical lending sector but continues to post double-digit growth rates, despite rising interest rates and a tepid demand environment.
It ended Q3 with $3.94 billion in total assets, rising 26% year over year primarily due to growth in goeasy’s consumer loan portfolio.
goeasy’s free cash flow from operations before net growth in gross consumer loans receivable in Q3 stood at $134 million, 40% higher than the year-ago period.
After accounting for its balance sheet cash and goeasy’s borrowing capacity, the company ended Q3 with $933 million in total liquidity.
Analysts tracking GSY stock expect sales to rise from $1 billion in 2022 to $1.47 billion in 2024. Its adjusted earnings are forecast to expand from $11.55 per share to $17 per share in this period. Priced at nine times forward earnings, GSY stock is priced at a discount to consensus price target estimates. Bay Street expects GSY stock to rise roughly 15% in the next 12 months after adjusting for dividends.
goeasy’s strong balance sheet, cheap valuation, expanding profit margins, and rising dividend payouts make the small-cap stock a top investment choice in 2024.
