The Ultimate Growth Stock to Buy With $1,000 Right Now

The combination of high growth potential, dividend increases, and low valuation makes this TSX stock a compelling option.

Sneha Nahata ❯

Sneha is a M.Sc. in finance and has been a Motley Fool contributor since mid-2020. Sneha specializes in writing about bank, energy, consumer and TMT (technology, media, and telecom) stocks. She focuses on identifying winning long-term stock picks.

Published February 6, 8:30 pm EST

Investors looking to boost their investment portfolio could consider adding growth stocks. As these Canadian companies are likely to grow at a solid pace, they could deliver market-beating returns. Moreover, these stocks will enhance your portfolio’s overall returns in the long term.

While choosing growth stocks, focus on industry leaders with solid revenue and earnings growth rates. Alongside them, focus on companies with a strong return on equity (ROE) and solid fundamentals. These companies are most likely to sustain future growth and deliver outsized returns.

Against this background, here is an ultimate growth stock to buy with $1,000 right now.

The ultimate Canadian growth stock

goeasy (TSX:GSY) is a top choice for investors seeking the ultimate growth stock. The subprime lender has consistently grown its revenue and earnings at a double-digit rate. Moreover, its strong earnings allow it to enhance its shareholder value through higher dividend payments. Besides strong fundamentals, goeasy has a high ROE and significant growth potential.

The financial services company is a leader in Canada’s non-prime lending market. Thanks to its favourable competitive dynamics, the company continues to see solid loan demand, which drives its financials.

Notably, goeasy’s top line has grown at a compound annual growth rate (CAGR) of 19% over the past decade. Its earnings growth was even better (bottom line increased at a CAGR of 28.6% during the same time), led by operating leverage and improving efficiency.

Thanks to its solid financials, goeasy stock has increased at a CAGR of 28.1% in the last 10 years, delivering a capital gain of about 1,096%. Along with solid capital gains, this financial services company has consistently increased its dividend over the past decade and returned higher cash. What stands out is that it has delivered an average ROE of 26.4% over the past five years.

Why invest in goeasy stock now?

Given goeasy’s leadership in the large subprime lending market, its efficient use of capital (reflected through high ROE), and the ongoing momentum in its business, goeasy could continue to deliver double-digit revenue and earnings growth. Its solid financials will drive its dividend payouts and share price.

goeasy’s growing market share, omnichannel offerings, wide product range, and geographic expansion will drive origination and loan growth. Moreover, its growing funding capacity and diversified sources of finance will likely accelerate the top-line growth rate.

Notably, goeasy continues to witness the benefits of scale through operating leverage and productivity improvements. During the third quarter (Q3), its efficiency ratio improved to a record 23.1%, reflecting a reduction of 5.5% from 28.6% in the prior year’s third quarter. This indicates that goeasy’s bottom line will likely grow at a solid pace led by the leverage from higher revenue, steady credit performance, and operating efficiency.

Thanks to its growing earnings, goeasy will continue to return more cash to its shareholders by consistently increasing its dividend. Further, goeasy stock trades at a forward price-to-earnings (P/E) multiple of 8.7, offering significant value near the current market price.