Bullboard - Stock Discussion Forum goeasy Ltd EHMEF

Primary Symbol: T.GSY

goeasy Ltd. is a Canada-based company, which provides non-prime leasing and lending services through its easyhome, easyfinancial and LendCare brands. The Company's segments include easyfinancial and easyhome. The easyfinancial segment lends out capital in the form of unsecured and secured consumer loans to non-prime borrowers. easyfinancial’s product offering consists of unsecured and real... see more

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TSX:GSY - Post Discussion

goeasy Ltd > TD

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Post by retiredcf on Aug 11, 2023 12:03pm

TD

Maintain their $165.00 target. GLTA

goeasy Ltd.

(GSY-T) C$131.00

Q2/23: Expect to Achieve High-End of 2023 Loan Growth Guidance Event

goeasy reported Q2/23 adjusted EPS of $3.28 (up 16% y/y) versus our estimate of $3.23 (consensus: $3.17). The EPS beat was driven by higher-than-expected loan growth and revenue yield as well as better-than-expected charge-offs. The fully- drawn weighted-average cost of debt remains manageable at 5.9% (4.9% in Q2/22). Adjusted ROE was strong at 24.2%.

Impact: POSITIVE

goeasy reported a strong quarterly result characterized by impressive loan growth (to higher credit-quality customers), stable credit losses, and an improving efficiency ratio. We take a closer look at these factors below.

Loan growth was strong with balances up 7% q/q and 35% y/y (above our estimate and management's guidance range). The company is now expecting to finish 2023 at the high-end of its guidance range ($3.4bn-$3.6bn; $3.2bn as of Q2/23). We believe this is very achievable as the company continues to experience healthy demand across products and channels.
Credit was solid with a net charge-off ratio of 9.1% (our estimate: 9.3%) vs. 8.9% last quarter and 9.3% last year. Stable credit performance reflects underwriting enhancements and improved quality/mix of the portfolio. Management targets a net charge-off ratio of 8.0%-10.0% in 2023E and 2024E.
Revenue yield was down ~25bps q/q and ~390bps y/y (much better than our estimate). We believe higher pricing on lower-risk products helped alleviate pressures from shifts in the portfolio mix.
The efficiency ratio has shown consistent improvement over the past several years (31.2% in Q2/23 vs 40%+ approximately two years ago), showcasing the scalability of the platform and improved operating leverage. We expect this trend to continue in the near- to medium-term.

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; our estimates largely fall within guidance ranges.