Image Source: Getty Images
Welcome to a multi-part series where I break down the fundamentals of some of the most popular stocks traded on the TSX! until today is calmly (TSX:GSY), a Canadian alternative lending platform.
Although it outperformed in 2021, goeasy has fallen on hard times recently, having lost -20% of its share price YTD. Many Canadians who bought goeasy around its 52-week high of $218.35 a share are experiencing heavy losses right now, with the stock currently trading at $140.28.
GSY provides lending and leasing services to consumers in Canada, operating through two segments, Easyfinancial and Easyhome.
Easyfinancial offers installment loans without collateral and with real estate collateral; personal, home equity and auto loans; retail and small business financing; and value-added services, while Easyhome leases home furnishings, appliances, electronics, computers, and offers unsecured loan products to retail consumers.
GSY is a growth stock, so we want to focus on metrics that attempt to measure the rate and consistency with which the company improves revenue, earnings, and profitability.
Goeasy recently saw revenue growth of 0.09% over the past 12 months, which is remarkably flat compared to its pandemic highs. For many growth stocks, flat trends like this are a warning sign that the company may not live up to market expectations.
On the operations side, goeasy experienced a deterioration in its operating cash flow per share of -1.94% over the last five years. We also saw the company’s operating income increase -0.21% and its EPS increase 2.16% over the fiscal year, which is not exactly what we want from a growth stock.
In terms of profitability, GSY currently has a 55% Operating Profit Margin, 32% Net Profit Margin, 38.26% Return on Equity and 9.87% Return on Assets. , which are healthy.
I don’t have the time or space here to do a full discount cash flow analysis, but we can look at various valuation metrics for goeasy to get an idea of what the stock’s intrinsic value should be.
GSY is currently trading with an enterprise value to EBITDA multiple of 9.01 and an enterprise value of approximately $4.08 billion, which is average compared to its peers in the financial sector and certainly more reasonable than that of the financials. 5 big banks.
As of last year, goeasy’s book value per share is $48.14, with a price/earnings ratio of 10.93, a price/sales ratio of 3.48, and a price/free cash flow ratio of -49.15. All of these are very reasonable, except for price to free cash flow, but otherwise imply a fair current valuation.
The silly takeaway
The 52-week low for GSY is at $121.25, which is a useful technical indicator for determining resistance levels or a potential bottom. In my opinion, I think goeasy is due to a bounce. Stocks currently look oversold, especially after the market’s sell-off last month.
Despite the rising interest rate environment, goeasy’s fundamentals are strong and the stock has fallen significantly from all-time highs. Investors looking for a growth play in the TSX financial sector may want to consider establishing a position in goeasy at its current price.