Great buying opportunity Even in a pessimistic scenario where gdp becomes negative and we enter a recession, the allowance for credit losses would not be material relative to net income. According to the 2020 annual report, a worse case scenario would have increased the allowance for credit losses by $14m which is relative to annual adjusted net income of $117m. Considering that our share price has dropped by a significant amount since the start of the year, I think it's fair to say that the worst case scenario is already priced into the stock. Also, keep in mind that the demand for money increases during economic hardships and Goeasy should benefit even if it comes with increased delinquency rates.
Moreover, the average borrower does not own a home and is not subject to mortgage rate increases. Because they do not own homes, they have less debt to after tax income than the average Canadian. This makes their ability to pay back the loan all the more likely.
I think the current price presents a very good opportunity to pick up cheap shares. Even in a worst case scenario, the company will still report y/y earnings growth. Finally, does everyone remember what happened in 2020 when the share price dropped in the low 20's? Irrational market behaviour can make people do the silliest things. In the long run, this company will be a classic Canadian compounder and an easy path to a nice retirement.