goeasy (TSX:GSY) has made waves in the financial market with its impressive performance over the years. With a market cap of $2.88 billion, goeasy has been a standout in the financial services sector, particularly in non-prime lending. Over the last 20 years, the stock has returned an astonishing 1,340% to investors. When factoring in reinvested dividends, the returns soar to 2,340%, showing consistent growth and making it one of the most profitable stocks on the Toronto Stock Exchange (TSX).
Despite its remarkable past performance, the question remains: can goeasy stock continue its surge into 2025? This blog post breaks down the key factors influencing goeasy’s stock growth, evaluates its current standing, and predicts whether it is a good investment for the future.
Is goeasy Stock Still a Good Buy Right Now?
goeasy operates in the cyclical financial lending sector, which means its performance is closely tied to economic conditions. When the economy is thriving, lending institutions like goeasy thrive too, benefiting from higher employment rates, stable or low interest rates, and lower loan defaults. However, during recessions, financial institutions tend to face challenges, such as higher loan defaults, reduced demand for credit, and squeezed profit margins.
At its core, goeasy provides non-prime leasing and lending services across Canada, primarily through its two business segments: easyfinancial and easyhome.
- easyfinancial offers unsecured loans, home equity lines of credit, auto loans, and other financial products.
- easyhome focuses on leasing household furniture, appliances, electronics, and other essentials to Canadian consumers.
With over 300 locations spread across Canada’s largest cities, goeasy’s extensive presence in the country provides it with a strong competitive advantage. Despite the macroeconomic challenges in 2024, the company has continued to demonstrate impressive growth.
goeasy’s Strong Q3 Performance
In the third quarter of 2024, goeasy posted the following results:
- Loan originations increased by 16% to $839 million.
- Loan portfolio grew by 28% to $4.4 billion.
- Sales surged by 19% to $383 million.
- Operating income rose by 25% to $163 million.
- Adjusted earnings increased by 13%, reaching $4.32 per share.
Additionally, goeasy saw a 22% rise in credit applications, and its customer base grew by 14%. These figures highlight a company that is not just weathering the economic storm but actively expanding.
Is GSY Stock Undervalued?
Despite its stellar performance, goeasy’s stock remains relatively undervalued. With a forward price-to-earnings (P/E) ratio of just 8.5 times—far below the industry average—many analysts consider the stock to be cheap, especially given its growth trajectory.
Analysts are projecting adjusted earnings to increase from $14.2 in 2023 to $16.7 in 2024 and $20 in 2025. This suggests robust growth potential for the company, further making it an attractive investment option.
Moreover, goeasy boasts a diverse funding capacity, with $1.8 billion in total funding and $700 million available in additional debt issuance. The company also claims it can grow its loan book by $300 million, entirely financed through internal cash flow.
Given these factors, goeasy’s stock appears to be priced attractively for those looking to invest in the financial services sector.
How Strong Is goeasy’s Dividend Growth?
goeasy has a strong history of dividend growth, having raised its payout multiple times over the past 20 years. Today, it offers a dividend of $4.68 per share, representing a yield of 2.7%. This is a significant increase from the company’s first dividend of $0.11 per share in 2004.
The dividend growth reflects the company’s ability to generate solid cash flow and reinvest in its business for future growth. In fact, goeasy’s stable credit metrics and improved operational efficiency suggest that the company is poised to maintain or even increase its dividend payments in the future.
The Financial Landscape: Key Considerations for goeasy Stock in 2025
While goeasy has demonstrated robust growth and resilience, it is crucial to consider the broader economic and market conditions as we approach 2025.
Interest Rates and Economic Growth
One major factor affecting goeasy’s future performance is the interest rate environment. The company’s lending activities, especially in its easyfinancial segment, are directly impacted by interest rates. Lower rates generally encourage borrowing, which benefits lending institutions. If the economy continues its recovery and rates remain favourable, goeasy could see sustained growth.
However, a rise in interest rates could strain borrowers, increasing the risk of defaults and impacting profitability. For this reason, it’s important to keep an eye on central bank policies and broader economic indicators.
Loan Defaults and Credit Risk
Despite its impressive growth, goeasy operates in a sector vulnerable to economic downturns. During times of recession, the likelihood of loan defaults increases, which could affect the company’s earnings. However, goeasy has demonstrated strong credit risk management, and its non-prime lending model focuses on higher-risk borrowers, meaning it may be able to navigate these challenges better than other financial institutions.
Competitive Landscape
goeasy’s future performance will also depend on how it stacks up against competitors in the non-prime lending and leasing markets. The company has a strong foothold in the Canadian market, but it will need to continue innovating and expanding its offerings to maintain its competitive edge.
Conclusion: Will goeasy Stock Continue to Surge?
Looking ahead to 2025, goeasy is well-positioned for continued growth, with a solid track record, robust financials, and a diversified funding model. Its current undervaluation and strong growth prospects make it an attractive option for investors looking for opportunities in the financial services and consumer lending sectors.
However, as with any investment, there are risks to consider. Economic conditions, interest rates, and credit risk will all play significant roles in determining the company’s future success. If goeasy can maintain its operational efficiency and continue to expand its loan portfolio while managing risk effectively, there’s potential for substantial returns.
If you’re looking for a stock with strong growth potential and a history of impressive returns, goeasy might just be worth adding to your portfolio as we move into 2025.
