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Goeasy: Has the Easy Money Already Been Made?

imageStock Markets4 minutes ago (Sep 27, 2021 03:31PM ET)

(C) Reuters. Goeasy: Has the Easy Money Already Been Made?

Goeasy (GSY) is a Canadian alternative financial service solution provider that’s been on a magnificent run.

The incredible appetite for BNPL (Buy Now, Pay Later) options, and elevated consumer debt levels, have been major contributing factors behind goeasy’s rally. After soaring over 114% year-to-date, has the easy money already been made?

It’s hard to ignore goeasy’s valuation, which still remains modest after yet another incredible year for the record books. As such, I remain bullish.

At writing, shares of goeasy trade at 13.9 times trailing earnings. For a company that’s continuing to grow its earnings at a stellar rate, such a multiple seems somewhat too good to be true. (See GSY stock charts on TipRanks)

Incredible top- and bottom-line growth, alongside a low price-to-earnings multiple suggest investors see risks ahead, or that they don’t think goeasy’s tremendous earnings momentum is sustainable.

Road Ahead

The early stages of an expansionary cycle tend to accompany a spending surge, especially in durable goods like furnishings and other discretionary “nice to have” items. Over the past year and a half, we’ve witnessed precisely this, as the world economy recovered from the coronavirus recession.

Canadian consumers swiped their credit cards or went to alternative lenders at a higher rate to finance everything from cellphone purchases, to high-end items to furnish a new home.

Goeasy has risen to the occasion, making it easier for cash- and credit-strapped Canadians to finance their purchases.

BNPL firms such as Affirm (AFRM) have become a household name, and as the appetite for consumer loans continues to heat up, alternative financial solution providers like goeasy could continue winning on the back of the BNPL trend.

Still, it’s hard to gauge when the BNPL trend will lose traction. Sooner or later, an economic downturn could bring forth a reversal in its momentum. We’re likely far off from the next structural economic downturn, although it is worth noting that Canada’s GDP did dip slightly into the negatives recently.

As such, goeasy and the broader basket of BNPL firms could continue to post further gains that could be far larger than any losses that’ll accompany the next downturn. Given this likelihood, goeasy’s stock may still prove to be undervalued here.

Wall Street’s Take

According to TipRanks’ analyst consensus rating, GSY stock comes in as a Strong Buy. Out of four analyst ratings, there are four unanimous Buy recommendations.

The average GSY price target is C$193.76. Analyst price targets range from a low of C$182.01 per share, to a high of C$207.01 per share.

Bottom Line

Despite having all Buy ratings on the name, the consensus price target suggests 6.8% downside potential from today’s prices.

Indeed, analysts will either need to hike their price targets, or downgrade their ratings. Given recent momentum and no prominent sore spots, I expect the former.

Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

Goeasy: Has the Easy Money Already Been Made?

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