Canadian Small Cap Model Portfolio
One name that fits our criteria is goeasy. Ranking near the top, goeasy's forward estimate has increased at an average annual growth rate of 29% over the past 10 years. Momentum has also picked up of late, with the positive turn in goeasy's estimate revisions (Figure 2). However, separating goeasy from Bombardier and other highly ranked names is the relatively lower standard deviation in goeasy's annual growth rates. goeasy's relatively low variability in its annual 12-month forward consensus estimate growth is achieved, in part, by the consistency in its operating earnings. As we show in Figure 3, goeasy's operating earnings have increased y/y for 35 consecutive quarters, with this trend expected to continue in the coming year.
Even though goeasy ranks, for us, as one of the premiere predictable small/mid-cap earnings growth names in Canada, its valuation remains reasonable, in our view. At 9.0x, goeasy trades well below the S&P/TSX Composite (14.8x) and in line with its long-term historical median (Figure 4). Finally, goeasy is firmly supported by its robust sales, which are at record highs, and have increased y/y every quarter since mid-2015 at a median growth rate of 16.7% (Figure 5).
As a highly ranked predictable growth name with what we consider an undemanding valuation, we are adding goeasy at a 3.0% portfolio weighting.