Q: What should the ultimate p/e ratio for Goeasy be? I know that p/e ratio in this sector tend to be low, but what would be fair in your eyes if say earnings growth plateaued at around 15% per year long term? 10X? 15X? Thanks.
5i Research Answer:
Being in the financial sector, its P/E ratio is unlikely to climb to the same heights as some high-growth tech names, but we feel that given its smaller size, higher growth rates, and generally higher levels of cyclicality, that its P/E could rise above many of its larger banking peers.
If earnings growth can remain relatively high around 15%, we feel that a forward P/E in the range of 10X to 15X would be reasonable, particularly if there is upside potential in its sales and earnings growth rates.