goeasy: A Perfect Blend Of Growth And Income (OTCMKTS:EHMEF)

The past year wasn’t easy on investors and the coming year isn’t likely to be all that attractive either. Financials in particular are expected to remain under pressure due to the threats of a pending recession.

That said, now is the perfect time to start looking at financial companies that have taken unjustifiably big hits to their share price over the past year. One such company is goeasy (OTCPK:EHMEF)(TSX:GSY:CA) which is trading near 52-week lows.

As of writing goeasy is trading at a very attractive 7.46 times forward earnings, well below its five-year average of 12.69. Likewise it has a price-to-earnings to growth (PEG) ratio of 0.46 which is a clear sign that its share price is not keeping up with expected growth rates.

Background

Goeasy stock has been making waves in the financial world as a company that provides non-traditional lending solutions. It is listed on the Toronto Stock Exchange and has a market capitalization of over $1 billion.

Goeasy was founded in 2003 and has since become a leader in providing alternative financial services in Canada. It offers a range of products including small personal loans, furniture leasing, and home improvement financing. These products are targeted at consumers who may not have access to traditional forms of credit or who are looking for a more flexible lending solution.

Growth Drivers

One of the key drivers of goeasy’s success has been its focus on responsible lending. The company has strict underwriting criteria and works to educate its customers on the importance of managing their finances. This has helped it to maintain a low default rate and has contributed to its strong financial performance.

When the Financial Crisis hit, many of the big banks left the non-prime lending business and goeasy stepped in to fill the gap. This has led to a very consistent and reliable history of growth:

In the third quarter of 2022, goeasy reported strong financial results with revenue of $203 million, up 9% from the same period the previous year. Earnings per share also increased by 12% to $2.86. These results were driven by strong growth in both its loan and leasing businesses.

Goeasy’s success has not gone unnoticed by investors. The company’s stock has outperformed the market in recent years, with a total return of over 200% in the past five years.

LendCare acquisition

Goeasy’s acquisition of LendCare is generally seen as positive for the company for a few reasons.

First, the acquisition helps to diversify goeasy’s product offerings and customer base. LendCare is a leading provider of point-of-sale financing and other lending solutions, primarily to the automotive, home improvement, and power sports sectors. By acquiring LendCare, goeasy is able to expand its reach and tap into new markets.

Second, the acquisition is expected to be immediately accretive to goeasy’s earnings per share to the tune of 10-15% annually over the next couple of years.

Finally, the acquisition expands goeasy’s geographical reach. LendCare has a strong presence in Eastern Canada, which complements goeasy’s existing operations in Ontario and Western Canada. This allows goeasy to better serve its customers across the country and potentially drive growth.

Overall, the acquisition of LendCare is seen as a strategic move that helps to diversify goeasy’s product offerings, expand its customer base, and drive earnings growth.

What makes goeasy stock a good investment?

First, the company’s focus on responsible lending has helped it to weather economic downturns and maintain a strong financial performance. This, combined with its diversified range of products, has allowed it to consistently grow its revenue and profits.

This alternative lender has been one of the fastest growing financial stocks with consistent year-over-year growth over the past five-years despite a challenging environment.

Second, goeasy operates in a large and growing market. The alternative financial services industry in Canada is worth billions of dollars and is expected to continue to expand in the coming years. This provides goeasy with a significant growth opportunity.

For years, goeasy has put out annual guidance and over the past decade (the period of which I’ve covered the company), not once has it missed these posted targets.

Finally, the company’s strong financial performance and dividends make it an attractive option for income-focused investors. It has an attractive 3.39% yield and has averaged 40% annual dividend growth over the past five years. Combined with its growth profile, goeasy is an attractive blend of growth and income.

Overall, goeasy stock is a strong investment for those looking for exposure to the growing alternative financial services industry. Its focus on responsible lending, diversified product range, and strong financial performance make it a solid choice for investors.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.