Friday, May 27, 2016

Goeasy Ltd.

Sound bite for Twitter and StockTwits is: I would not buy. The only reason I continued on this company is to point out what I see wrong with it. I am surprised that the Investment Reporter would recommend such a stock. I do not like their business model and I think that they have a lot of negatives. See my spreadsheet on Goeasy Ltd.

I do not own this stock of Goeasy Ltd (TSX-GSY, OTC-EHMEF). In April of 2016 Investment Reporter said to seek stocks with growing dividends from The Investment Reporter Key stock buys. This is one stock that was named.

This is not quite the same as pay day loans. They are called installment loans. But interest rates are very high. They are, in a nutshell, unsecured, high-interest, subprime, short-term loans. All you can say about the interest rate is that it is below 60%, which is at the criminal rate. See CBC article on this company here and another about Easyhome here.

I would not buy this company. There are complains about this company charging interest rates around the legal limit which is 60%. They may go over because of fees. Also, there are comments about how much it charges for people to buy from them on the installment plan. For example their SAMSUNG 58'' Smart LED TV is listed at $35 per months for 156 months. This is $5460.00. The Brick and Best Buy have it for $999.99. I check this online on May 22, 2015 here.

The positives are that this company has good growth in Revenue, Earnings and Cash Flow. Looking at Revenue, I see that it has grown by 11% and 11.4% per year over the past 5 and 10 years. Revenue per Share has grown at 8.3% and 8.1% per year over the past 5 and 10 years.

The total return over the past 5 years is very good, but not so much for the past 10 years. The total return is at 18.05% and 3.76% per year over the past 5 and 10 years. The portion of this growth attributable to capital gains is at 15.40% and 1.83% per year over the past 5 and 10 years. The portion of this growth attributable to dividends is at 1.95% and 3.04% per year over the past 5 and 10 years.

Some of the debt ratios are good. The Liquidity Ratio seems reasonable. However, they do not give you current assets on their balance sheets so you have to figure it out or accept what sites like Google Finance says. The Debt Ratios are fine with the one for 2015 at 1.73.

I find a lot more negatives, including the one mentioned above about this business this company is in. There was no dividend growth between 2010 and 2014 inclusive. Dividend increases were restarted in 2014 with an 11% rise. The last dividend increase was in 2016 and it was a 30% increase. Looking at dividend growth it is at 1.6% and 8% per year over the past 5 and 10 years. Dividend growth of 1.6% over the past 5 years is a very low growth.

The one thing about debt ratios that I do not like is the Long Term Debt to Market Capitalization. Long Term Debt is 90% of the market cap. A high long term debt to capitalization ratio would indicate the financial weakness of the firm and the debt would most likely increase the risk of the company. This is not a good thing.

Another negative is the Net Insider Selling. This is at 1.37% of market cap. This is relatively high. The median NIS for the stocks I follow is 0.02% and 75% are at 0.12% or lower.

The 5 year low, median and high median Price/Earnings per Share Ratios are 8.07, 11.28 and 13.70. The corresponding 10 year ratios are higher at 10.71, 14.50 and 18.29. The current P/E Ratio 8.12 based on 2016 EPS estimate of $2.34 and a stock price of $19.00. This stock price testing suggests that the stock price is relatively cheap.

I get an historical dividend yield of 2.42%. The current dividend yield is 13% higher at 2.74% based on a stock price of $19.00 and dividends of $0.52. This stock price testing suggests that the stock price is reasonable and below the median.

When I look at analysts' recommendations, I find Strong Buy and Buy recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price consensus is $31.21. This implies a total return of 67%, with 64.265 from capital gains and $2.74% from dividends.

Todd Miller on The Post talks about this company having a big run up on May 25, 2016 and that analysts that follow it mostly rate it a buy. It is interesting that the company announced a Point of Sale Financing Venture with Sears Canada. Fabrice Taylor wrote at the end of 2015 that he owns this stock. Obviously, people have different opinions to mine.

Yesterday on my other blog I wrote about the sectors I invest in compared to CDZ... learn more . The next stock I will write about will be Ensign Energy Services (TSX-ESI, OTC- ESVIF)... learn more on Monday, May 30, 2016 around 5 pm.

Goeasy Ltd. is the leading full service provider of goods and alternative financial services that improve the lives of everyday Canadians. Today, Goeasy Ltd. serves its customers through two key operating divisions, Easyhome Leasing and Easyfinancial. Its web site is here Goeasy Ltd.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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