Last year, when the health crisis broke out, drowsy (TSX: GSY) was one of the biggest losers. The stock lost approx. 70% of its value in less than a month. And with good reason. goeasy offers credit to subprime borrowers – the most vulnerable part of borrowers during any economic downturn.
However, this slowdown has proved very different. The government stepped in to rescue households and the vaccine was discovered sooner than anyone had expected. It has helped goeasy rise 350% since March. And momentum could be maintained in 2021.
Here are three reasons why goeasy should be on your radar this year.
The Canadian government stepped in to protect citizens like no other country did. Households who lost their jobs or contracted the virus were paid up to $ 2,000 a month in benefits for about four months. The government also increased childcare payments, tax benefits from working from home and nursing staff incentives.
In all, over eight million Canadians were protected from financial hardship. That may be one of the reasons why crime dropped so low. With benefits rolling in and nowhere to spend the money, Canadians have more savings than ever before. Much of this has been spent on repaying debt.
The stimulus boom has saved drowsy. With borrowers paying back what they owe, the company’s books are in great shape. And with its finances in order, it’s heading into one economic recovery.
The rollout of the vaccine has been frustratingly slow. However, given the country’s small population and tight density, it’s likely that the economy could reopen completely in the second half of 2021. This could unleash a wave of encapsulated demand, which is excellent for credit providers like the fat.
goeasy already works on the back of solid basics. A recovery in consumer demand should result in an increase in the company’s financial services and products. Vaccine distribution and economic expansion should provide growth in the greasy loan portfolio.
The subprime lender has seen its bottom line rise at a strong double-digit rate over the last two decades. Momentum looks set to continue in 2021 amid improvements in the loan’s origin rate, new products and channel expansion.
An increase in economic activity should increase the demand for credit and in turn increase revenue. Likewise, an increase in the free cash flow should allow the company to continue to make quarterly distributions, where the dividend yield is currently 1.9%.
A high-quality earnings base should allow goeasy to increase its shareholder return through higher dividend payments. Amid the astonishing gains over the past year, the financial services company is still reasonably rated with a price to earnings ratio of 15.
goeasy was one of the hardest hit stocks when the crisis broke out. Investors (including me) were concerned about a sharp rise in bankruptcies and criminal acts. Instead, government stimulus programs helped millions of ordinary Canadians pay off debt.
Now, with record-breaking savings, Canadians are facing an economic recovery. In the second half of 2021, businesses could reopen across the country, employment could increase, and elevated demand could be released. That makes goeasy a top stock choice for the year.
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