Non-prime lender goeasy (TSX:GSY) has helped more than 60% of its customers move to prime lending. It also helped its long-term investors become wealthier in all the years it lent money to those who were rejected credit by the traditional banks. In 2000, the lending market was booming, and goeasy was a small player. It would have been difficult to imagine that this non-prime lender would take a significant market share and grow to become a relevant player with a $2 billion loan book.
goeasyâs growth journey
Come to think of it, growth was pretty slow in the first decade of the century. That was when the world witnessed the biggest financial crisis triggered by sub-prime lending. Many U.S. banks failed, but a small Canadian lender like goeasy survived. Over the years, goeasy expanded its portfolio from small personal loans and home financing to point-of-sale credit and auto loans.Â
The companyâs business model is to add more merchants to its pool, cross-sell to existing customers, and reach new customers through branch networks and digital platforms.
While companies with high debt are struggling with high-interest expenses, goeasy is growing its revenue and profit. The company earns revenue from interest income, loan processing fees, commissions, and leases. Its revenue and net income surged 22% and 66.1%, respectively, in the first half, thanks to new loan originations and higher net interest income.
goeasy is growing at a rapid pace. It doubled its loan portfolio from $1 billion in 2019 to $2 billion in 2021. It aims to reach a $3.6 billion portfolio by 2023 and surpass $5 billion byÂ 2025. So far, it is on track to achieve its target. While many companies revised their mid-term targets, goeasy maintained them, hinting the business is doing well.
Difference between the $5,000 invested in goeasy in 2000 and 2012
While the business grew, goeasy stock took a while to pick momentum, as investors were not fond of lenders after the subprime crisis. The stock surged 60% between January 2000 and 2013. Here, you can see the benefit of a marketÂ downturn. Those who invested $5,000 in goeasy stock in January 2000 purchased 576 shares for $8.67 per share. But had you purchased it in November 2012 when it fell below $7, you could have bought 778 shares.Â
|Year||goeasy dividend per share||Dividend on 576 shares||Dividend on 778 shares|
The period from November 2008 to November 2012 was weak for the lender, as the economy was recovering from the crisis. The market crash helped investors catch up on the 12 years of missed investment years. The only thing the 2012 investors missed was $1,500 of combinedÂ dividendÂ payments for 12 years. But the 200 extra shares made up for lost dividend income and even increased it. Letâs see how.Â
The capital growth of goeasy
But goeasy is not popular for its dividend per se. The stock price began its rally from 2013 onwards and grew from less than $7 in 2012 to $126.76 in 2023. Had you invested $5,000 in 2012, your 778 shares would now be worth $98,619.
|Investment date||Invested amount||Portfolio value|
Adding up the capital growth and accumulated dividend, your $5,000 investment in 2012 would be around $111,600. Had you invested in 2000, your investment would be around $84,000.
goeasyâs stock trajectory shows how value investors who bought in a market downturn turned the returns in their favour. The stock market is currently volatile, as fears of another recession loom. Keep an eye on this stock and buy into a downturn, as the company has the fundamentals to resume growth when the economy recovers.Â
The post If Youâd Invested $5,000 in goeasy in 2000, Hereâs How Much Youâd Have Today appeared first on The Motley Fool Canada.
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