This is more of a general comment , discussion on Gsy valuation. Is it just me or the earnings growth this company is putting out in relation to its p/e seems incredibly cheap. Looking at their history , quarter after quarter continues to be record and shows the most stable growth out of any of my holdings on a long term basis. The ceo really seems to know what he’s doing here. I think this should be a $1000 stock within 8-10yrs of growth remains as is and they are given a fair multiple in the market. Am I crazy to think this ? This isn’t even accounting for their new growth initiatives such as the credit cards they are going to probably be rolling out, or expansion into the US. Just looking for your thoughts on this and what might prompt the market to start recognizing the stock fairly in regards to valuation ? Thanks
Shane
We do think it is undervalued. But until investor perception changes, we would not expect huge changes in valuation. But growth can move the stock even without a valuation boost. If a re-valuation occured, it would be even better. Investors worry about competition. Regulation. Recession. Losses. Cyclicality. The change in maximum interest rates recently highlighted some risk on the regulation side. Many do not like the business at all, seeing it as 'taking advantage' of low income consumers. It is in the financial sector, where valuations are already low. Thus, it gets a paltry 9X earnings valuation. Based on its strong history, we think it should get 12 to 14X, which would mean a nice move. BUT...the above factors are also sentiment-based, and this can be hard to change. Regardless, we like GSY a lot, it has peformed very well over time, and has adapted to many different factors and prospered.