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  5. GSY: The current price of GSY is tempting. [goeasy Ltd.]
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Q: The current price of GSY is tempting. Your market data shows a median target of $227 which is 33% over current. Earnings are expected to grow 20% next year ($20.28-16.91) which gives a forward P/E of 10 and that compares nicely to the 5 year low P/E of 7. Historically the stock has performed well, the 5 year CAGR for the stock price is 30% which doesn't include the dividend. While the numbers look tempting, the market is giving a big yawn and I wonder what I am missing that others aren't. Perhaps you could try to explain the yawn. Feel free to correct any of the numbers if Bloomberg is reporting something different.
Mike
Asked by michael on November 26, 2024
5i Research Answer:

We think it is quite attractive overall and its historical record speaks for itself. It may never get a huge valuation multiple. It is a bit economically sensitive and it is regulated by governments. Max interest rates are being capped, and Trump has talked about 10% caps on credit cards. The industry is always in the sights of politicians because of the high rates it charges to consumers with the least ability to pay those rates. At GSY, growth has de-celerated a bit, and investors for now have preferred the faster growing PRL. But that does not make GSY a bad investment. It is gaining market share as competitors struggle with the new rate caps and financing. GSY's ROE continues to be most impressive. It has controlled its share count growth well. EPS should grow by 20%+ next year. It is hard for us to find major flaws here. Yes, a bad recession would hurt, but it has handled past cycles very well. Yes, governments could change the rules, but they have already and GSY adapted. The banks could decide to compete in this space, but we highly doubt they will. We think it is quite interesting at current levels.