TSX:GSY - Post Discussion
Post by
retiredcf on Nov 02, 2022 2:41pm
TD
Have a $195.00 target. GLTA
goeasy Ltd.
(GSY-T) C$111.59
Q3/22 Preview Event
GSY will report Q3/22 earnings after market close on November 10, with a conference call scheduled for 11:00 a.m. the following day (dial-in link; webcast). We forecast Q3/22 adjusted EPS of $2.81, up 4% y/y; consensus: $2.81.
Impact: NEUTRAL
The key areas we are focused on in this quarter include:
Loan growth: Continuing on the momentum from last quarter, we believe non- prime loan demand will remain robust in Q3/22E. Recall, last quarter, GSY had a record volume of applications, which were up 51% y/y. In Q3/22E, we forecast gross loans increasing ~7.7% q/q or ~$183mm, which is near the lower end of management's guidance range of $180mm-$200mm, but still represents the second- strongest quarter of organic growth by a material margin. We expect many of the company's recent investments to support the strong levels of growth, including the auto-loan product (GSY is targeting ~900 new dealer partners in 2022), home equity loans, and the powersports product. Our forecast contemplates loan growth of 32%/22% in 2022E/2023E.
Credit: Net charge-offs (NCO) have increased to relatively normalized levels over the past few quarters. In Q3/22E, we forecast an NCO ratio of 9.8%, up from 9.3% last quarter and 8.3% last year, and within management's guidance range (9.0%-10.0%). Additionally, we have built-in a slightly higher provisioning rate to our estimates to reflect the strong expected loan growth, elevated inflation, and a slight deterioration in the macroeconomic outlook. That being said, credit still remains favourable, in our view.
TD Investment Conclusion
We like goeasy for five primary reasons: 1) the company's unique position within the Canadian financials space in that it is a growth company exhibiting a superior ROE; 2) the significant opportunities for continued growth in its current market and new verticals and potential geographic expansion; 3) credit risk is well-managed; 4) potential for additional acquisitions to further boost growth; and 5) track record of rewarding shareholders via dividend increases. Additionally, management has a strong track-record of meeting or exceeding guidance; substantially all of our estimates fall within guidance ranges. Given the level that the stock is currently trading at, we view GSY as an attractive BUY.
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