Opinions
Colin Stewart
goeasy
GSY-T
HOLD
Feb 19, 2025
Stock price when the opinion was issued
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Wonderful company. Fantastic operator, very good risk manager. Delinquencies on credit cards, rising bankruptcies, and overall economy suggest more credit defaults. This will hit the non-prime customers of GSY more. But that could be your opportunity to enter the stock, as it'll benefit on the other side when the economy starts to expand.
See comments on Propel Holdings, too. This stock has done well over time, but investors have been selling this recently. The new CEO has 20 years' experience in retail banking, very good. The valuation is cheaper now, while the dividend has been there a long time and continue to raise it. Good long term, but one day he thinks some company will buy it out.
50% of its business is non-prime, unsecured lending. Great job helping people to restore their credit. Can reprice loans pretty quickly, in a matter of 2-3 quarters -- and that explains why they haven't had big losses over the years. This ability also reduces their exposure in an economic downturn. Banks are now turning away borrowers, and GSY can pick them up.
Tremendous compounder. Has faith they'll get through this. The misconceptions on credit are creating a volatile stock price.
Still likes it. Now expanding into credit cards. Over last 10 years, EPS has gone from $2 to $20. Returned 25% annually to investors over time, including dividends. One of the best-performing stocks in Canada. Volatile name, and you have to have the stomach to hold it through the cycle. Extremely cheap at 7x PE.
Whenever people get worried about the economy, they tend to get worried about the non-prime lenders because of unemployment spiking. But when you get into a tough economy, that's actually the best time to buy these names. Banks tighten credit, and better-quality borrowers slip down to lenders like GSY.
The CEO left suddenly which un-nerved some investors. Last week's numbers were fantastic. It is moving into the next stage and sub-prime lending. Has kept loan losses at a reasonable level. It is adding an auto lending division which is very profitable. He sees growth in the next phase. You could trade around institutions getting in and out.
A solid hold. The new CEO is doing a great job, wanting to double their loan bank in 5-7 years. Are expanding into other financial services. Offers a high ROE. A lot of positives have been priced in. If the economy weakens, you can buy this cheaper. Buy a half position, but not full now.
The short-seller alleges that GSY is taking on riskier loans as consumer are more pressured in this market. GSY is managed well, has been around many years, so is certain that they have many reserves to protect them from riskier loans. Expects share to at least partially recover. The PE is too high for him.
Has done well over the years. New CEO of a few months has good credentials, but pressure on stock is about the economy. He'll monitor next set of results to see how it's faring in the more sluggish Canadian economy. Performance depends on its credit underwriting -- as the economy gets stressed, loan losses may go up.
Recent results were quite strong. Overhangs include respected CEO retiring and concerns about economy. Some regulatory risk on maximum interest charged. Overall, great compounder. Don't focus on short-term stock moves.