I do not own this stock of Goeasy Ltd (TSX-GSY, OTC-EHMEF). 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'' 4K UHD TV is listed at $25 per months for 156 months. This is $3900.00. The Best Buy have it for $699.99. I check this online on June 09, 2020.
When I was updating my spreadsheet, I noticed that I still do not like their debt situation. The Long Term Debt/Market Cap for 2019 is ok at 0.70, but the current one is 0.94 and so is getting rather high. The Debt Ratio is low at 1.34. The Leverage and Debt/Equity Ratios are too high at 4.01 and 3.00.
Stock options are much to high. The increase in Outstanding Shares for 2020 is 2.57%. The 5 year median increase in shares for stock options is 1.72. What you would expect is an increase no greater than 0.50% on average.
The dividend yields are moderate with dividend growth high. The dividend yields from this stock is moderate (2% to 4% ranges) with the current 3.14% and 5, 10 and historical dividend yields at 2.07%, 2.21% and 2.17%. The last 5 dividend increases have been the high range (15% and above). The last dividend increase was for this year at 45.2%. See chart below on Dividend Growth over the years.
The Dividend Payout Ratios (DPR) are fine except for FCF. The DPR for 2019 for EPS is 28% with 5 year coverage at 25%. The DPR for Cash Flow for 219 is 5% with 5 year coverage at 5% also. The DPR for Free Cash Flow for 2019 is negative as is the 5 year coverage so this cannot be calculated. There is some differences in FCF from different sources, but both agree FCF is and has been negative.
Debt Ratios should be improved. The Long Term Debt/Market Cap Ratio for 2019 is 0.70 and the current on is 0.94. The current one is too high and it high because of the drop in the stock price and an increase in debt by 10%. The Liquidity Ratio for 2019 is very good at 3.20, but in the first quarter it is 1.58, which is still a good value. The Debt Ratio is an important one and it is low at 1.34 with 5 year median at 1.44. The current one is only a bit lower at 1.33. The Leverage and Debt/Equity Ratios are too high at 4.01 and 3.00 respectively. They are often too high with the 5 year medians at 3.33 and 2.32.
The Total Return per year is shown below for years of 5 to 24 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.85, 11.97 and 14.51. The corresponding 10 year ratios are 8.80, 11.76 and 14.78. The corresponding historical ratios are 9.44, 13.37 and 17.36. The current P/E Ratio is 11.31 based on a stock price of $57.36 and 2020 EPS estimate of 5.07. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $52.49. The 10 year low, median, and high median Price/Graham Price Ratios are 0.65, 0.85 and 1.07. The current P/GP Ratio is 1.09 based on a stock price of $57.36. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.44. The current P/B Ratio is 2.37 based on a stock price of $57.36, Book Value of $347M, and Book Value per Share of $2.37. The current ratio is 64% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 2.11. The current P/CF Ratio is 2.47 based on a stock price of $57.36, last 12 month Cash Flow (excluding WC) of $333M and Cash Flow per Share of $23.21. The current ratio is 17% above the 10 year median. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 2.17. The current dividend yield is 3.14% base on dividends of 1.80% and a stock price of $57.36. The current dividend yield is 45% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.21. The current dividend yield is 3.14% base on dividends of 1.80% and a stock price of $57.36. The current dividend yield is 42% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.83. The current P/S Ratio is 1.28 based on 2020 Revenue estimate of $642M, Revenue per Share of $35.70 and a stock price of $57.36. The current ratio is 55% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. I know that the dividend yield test is showing the stock as cheap, but dividends are rising (5 year, 26.3% per year) faster than both EPS (5 year, 24% per year) and Revenue (5 year, 16.9% per year). The P/S Ratio test shows the stock price is relatively expensive. The Revenue estimates are probably reasonable.
Why the P/B Ratio tests say that the stock is showing the stock as expensive is because the book value is not growing as fast as the earnings. 5 year EPS growth is 24% per year, but 5 year Book Value per Share growth is 15% per year. Because the Graham Price includes both EPS and Book Value in its calculation, it is showing as expensive because of the Book Value part and lower growth in Book Value. However, the P/GP Ratios are low and a P/GP Price of 1.09 on an absolute basis is not high. There is nothing wrong with the P/CF Ratio test. It is showing as reasonable but above the median because the CF is growing, but not as fast as earnings.
Is it a good company at a reasonable price? First, I would not buy this stock because of the complaints against the company and I do not like investing in Pay Day type Loan companies as a way of making money. I am inclined to think that the stock price is relatively expensive, but I would be wrong. It is certainly not cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (4) and Sell (1). The consensus would be a Buy. The 12 month stock price is $61.21. This implies a total return of 9.85%, with 6.71% from capital gains and 3.14% from dividend.
Some analysts on Stock Chase do not like their business. Adam Othman on Motley Fool likes this for a TFSA account as it has made a good recovery from the March lows. A writer on Simply Wall Street likes this company because dividend is well covered by earnings and it has been increasing nicely. A writer on Simply Wall Street talks about this stock’s beta and what it means. News on Reuters talks about National Bank raising the target price to $66 from $45 or this stock.
Goeasy Ltd provides financial services to own furniture, electronics, computers, and appliances. It offers merchandise leasing of household furnishings, appliances, and home electronic products to consumers under weekly or monthly leasing agreements. The company also offers unsecured installment loans to consumers. Its web site is here Goeasy Ltd.
The last stock I wrote about was about was Husky Energy Inc (TSX-HSE, OTC-HUSKF) ... learn more. The next stock I will write about will be Lassonde Industries (TSX-LAS.A, OTC-LSDAF) ... learn more on Friday, June12, 2020 around 5 pm. Tomorrow on my other blog I will write about Construction Stocks.... learn more on Thursday, June 11, 2020 around 5 pm.
Also, on my book blog I have put a review of the book Three Stones Make a Wall by Eric Cline learn more...
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