GSY:CC - Meet the Growth Stock I Can't Stop Buying This Year
2024-05-09 16:00:00 ET
There are few growth stocks that have offered the stability of this growth stock. It’s one I’ve purchased over and over and continued to see rise higher. And just when analysts believe it couldn’t possibly come out with another strong quarter, it does.
That’s why today we’re going to look at my favourite growth stock, goeasy ( TSX:GSY ). Shares of goeasy stock are up 78% in the last year alone, with analysts predicting even more to come. So, let’s go over why it’s my absolute favourite growth stock on the TSX today.
Leading market position
If you need a loan, you tend to go to a bank, right? Well, that’s changed in the last several years in the case of goeasy stock. The stock is primarily focused on providing non-prime consumer lending and other financial services . It targets consumers who may have difficulty accessing credit from traditional financial institutions due to factors such as low credit scores or limited credit history.
The size of the non-prime lending market can be substantial, as significant portions of the population often fall into this category. As such, goeasy’s market potential is closely tied to the demand for non-prime lending products. This includes even during market downturns, when there is an increased need for alternative financing options, potentially expanding goeasy’s market potential. However, during periods of economic prosperity, the demand for non-prime lending may decrease.
Regulatory environment
Another point of contention in the last few years has been regulations from the federal government. However, goeasy stock has managed to take this in stride. Last year, the federal budget proposed a cap on annual percentage rate (APR) on interest at 35%. This aims to protect borrowers, particularly those with lower credit scores, from high-interest loans.
Since goeasy specializes in non-prime lending, a cap on interest rates could affect its business model. However, as of February 2023, about 36% of its loan portfolio had interest rates exceeding 35%. Furthermore, it plans to decrease it to below 30% over the next few years.
In fact, the company has downplayed the impact. goeasy believes the new rule will only apply to future loans, not existing ones. This gives it time to adjust. Plus, the cap might reduce competition from smaller lenders with even higher rates, potentially benefiting goeasy stock.
Earnings continue to climb
While all this is going on, goeasy stock has continued to perform well. Most recently, this was demonstrated through its first-quarter earnings report. The company has demonstrated impressive financial performance, with significant growth across key metrics such as loan originations, loan portfolio, revenue, and earnings per share. The company’s revenue increased by 24% year over year to $357 million, while diluted earnings per share increased by 13% to $3.40.
Furthermore, goeasy stock experienced robust loan growth, with loan originations increasing by 12% and the loan portfolio expanding by 29% year over year. This growth indicates strong demand for goeasy’s lending products and services. Yet, despite the growth in lending, goeasy maintained stable credit and payment performance, with a net charge-off rate within the company’s targeted range. The allowance for future credit losses increased slightly, reflecting prudent risk-management practices.
Finally, goeasy stock achieved record operating income and operating margin, driven by operational efficiency improvements and an increase in operating leverage. It also strengthened its balance sheet and liquidity position through the issuance of senior unsecured notes and continued access to funding facilities. So, it’s no wonder goeasy was able to increase its quarterly dividend to $1.17 per share.
Bottom line
Overall, goeasy stock has everything going for it: a rising share price, market strength, and a strong balance sheet. So, I’ll continue to invest in this growth stock for the foreseeable future, and investors may want to consider it as well.
The post Meet the Growth Stock I Can’t Stop Buying This Year appeared first on The Motley Fool Canada .
Fool contributor Amy Legate-Wolfe has positions in Goeasy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
2024