Investors looking for a stock that could 10 times in 10 years could consider investing in shares of a company that would deliver a compound annual growth rate of at least 26%. While the TSX has several growth stocks that have consistently delivered or exceeded this target growth rate, goeasy (TSX:GSY) stands out as my top pick.
goeasy is Canada’s top non-prime consumer lender. The company offers unsecured and secured loans and point-of-sale financing through its easyfinancial, easyhome, and LendCare brands. It’s worth highlighting that goeasy stock has grown at a CAGR of over 28% in the past decade. It has delivered even more attractive returns in recent years.
For instance, this Canadian stock is up about 49% in one year. Moreover, it has grown at a CAGR of nearly 35% in the past five years, delivering a total return of about 348%.
Going by goeasy stock’s recent performance (five-year CAGR of about 35%), it can potentially turn your initial capital of $1,000 into $20,106.56 in 10 years, implying more than a 20 times return. Against this background, let’s look at the factors that could drive goeasy stock over the next decade.
Solid financials to support the uptrend
goeasy’s stellar returns are based on the company’s solid fundamentals and ability to consistently deliver above-average growth. It’s worth highlighting that this financial services company’s revenue has increased at a CAGR of 17.7% from 2012 to 2022. At the same time, the company’s adjusted EPS (earnings per share) had a CAGR of 29.5%.
The company’s growth has accelerated in recent years. For instance, goeasy’s five-year revenue (as of September 30, 2023) CAGR is 19.6%. Meanwhile, its EPS sports a CAGR of 31.9% during the same period.
goeasy’s rapid growth is supported by the company’s diversified revenue sources, large addressable market, efficiency improvements, and solid underwriting capabilities. These strengths have enabled the company to consistently generate steady credit performance. Furthermore, its strong balance sheet, diversified funding sources, and omnichannel offerings support its growth.
The company is in the early stages of product, channel, and geographic expansion, implying it has a significant runway for growth in the coming years. Looking ahead, the increase in loan originations will drive its consumer loan portfolio and revenue. Further, its significant funding capacity augurs well for top-line growth.
Higher sales, steady credit and payment performance, operating leverage, and margin expansion will enable it to grow its earnings at a double-digit rate.
Bottom line
goeasy has the potential to grow its revenue and earnings at a double-digit rate. This will enable the value lender to deliver solid capital gains. Further, investors will benefit from the company’s focus on returning cash to its shareholders.
It’s worth highlighting that goeasy’s growing earnings base has led the company to pay and increase its dividend. goeasy has been distributing its dividend for 19 years. Moreover, it increased its dividend for nine consecutive years.
goeasy stock is trading at a forward price-to-earnings multiple of 9.8, which appears attractive considering its stellar earnings growth and dividend yield of 2.4% near the current levels.
