Investing in growth stocks is a smart move for those looking to make their money work harder. With $5,000, you can position yourself in companies that are projected to grow at a faster-than-average pace compared to the rest of the market.
Growth stocks typically reinvest their profits into expansion, innovation, and acquisitions rather than paying out substantial dividends. This is why they are ideal for investors focused on capital appreciation. Growth stocks are often found in sectors like technology, healthcare, and finance – industries with the potential for transformative growth. While these may come with higher volatility, the long-term rewards can be significant, thus making them a strategic choice for patient investors with a higher risk tolerance.
Consider goeasy stock
One standout option on the TSX is goeasy (TSX:GSY), a financial services company specializing in non-prime lending and leasing. At a recent price of $175.94 per share, goeasy has been a consistent performer, reflecting a year-over-year price increase that speaks to its resilience and growth potential. As of writing, goeasy has a market capitalization of $2.9 billion and an enterprise value of $6.2 billion, thus signalling its substantial footprint in the financial services industry.
Goeasy’s financial performance is nothing short of impressive. For the trailing 12 months (TTM), the company reported revenues of $803.9 million and a net income attributable to common shareholders of $283.9 million, thus translating to a robust profit margin of 35.3%. These figures underscore the company’s efficiency in converting revenues into profits – a key indicator of financial health. Its return on equity (ROE) of 25.8% is particularly noteworthy, highlighting management’s ability to generate strong returns for shareholders. Such metrics make goeasy an attractive pick for investors seeking a blend of growth and stability.
What sets goeasy apart is its consistent growth trajectory. In the third quarter of 2024, the growth stock posted revenues of $383.2 million and net earnings of $84.9 million, reflecting steady growth in its lending and leasing segments. These numbers are even more impressive considering the challenging economic conditions many companies faced last year. With quarterly earnings growth of 28.1% year-over-year, goeasy has demonstrated its ability to thrive in diverse market environments.
Future outlook
Looking to the future, analysts are optimistic about goeasy’s growth prospects. Its forward price-to-earnings (P/E) ratio of 8.6 suggests the growth stock is undervalued relative to its expected earnings. This metric, combined with a consensus analyst price target of $219.89, indicates a potential upside of approximately 26% from its current trading price. Analysts also forecast revenue growth of 21% for 2025 and 14% for 2026, with normalized earnings per share (EPS) expected to rise by 20% next year. This robust outlook cements goeasy as a leading candidate for growth-oriented investors.
Another appealing aspect of goeasy is its shareholder-friendly approach. The growth stock pays a dividend with a current yield of 2.5%, slightly above its five-year average of 2.4%. With a payout ratio of 30.5%, goeasy retains enough earnings to fuel its growth while still providing a steady stream of income to its shareholders. For those who value both capital appreciation and dividends, this balance makes goeasy a rare find among growth stocks.
Despite its strong performance, goeasy’s debt level is worth noting. The growth stock has a total debt-to-equity ratio of 292.6%, which is on the higher side. However, this is offset by its substantial cash reserves of $238.6 million and a current ratio of 16.28, indicating excellent liquidity. Moreover, its ability to generate consistent profits and maintain high margins suggests it is well-equipped to manage its debt responsibly.
Bottom line
For investors with $5,000 to allocate, goeasy offers a compelling blend of financial strength, growth potential, and shareholder returns. Its strong fundamentals, proven track record, and positive outlook make it a standout choice in the TSX growth stock space. While all investments carry risks, goeasy’s solid performance metrics and future prospects suggest it is well-positioned to deliver significant returns for long-term investors. As always, due diligence and a clear understanding of your investment goals are crucial before making any financial commitments.