© Reuters. Better than banks: why goeasy is one of the best stocks to buy now
Bank stocks reported profits this week, and many investors were watching to see how they fared, as banks are almost always among the best stocks to buy and hold for the long term.
This earnings season has been particularly interesting because, on the one hand, rising interest rates are generally positive for banks. On the other hand, however, with the economy facing so many headwinds, investors will be looking to see how credit provisions may have impacted earnings.
Canadian banks are known around the world for their security and risk management. This is why they are among the most popular and best Canadian stocks to buy over the long term. Their consistent long-term growth, coupled with their proven resilience, make them incredible investments.
However, as attractive as many banking stocks are, one financial company that seems to be even more attractive, and among the best stocks you can buy right now, is goeasy (:TSX:).
Here’s why goeasy is one of the best stocks to buy now goeasy is a financial stock whose core business is centered around lending to subprime borrowers. It is certainly a more risky business model than bank stocks. However, it offers much more growth. And for years, goeasy has proven that it can manage this risk. So, with the stock selling off so heavily in recent months, it’s easily one of the best to buy now.
goeasy has a long-term net charge rate target of 8.5-10.5%. And currently, its net charges in the first quarter are only 8.8%. In addition to the 8.8% weakness and the way goeasy has managed its risk in the past, there is also substantial room for this to rise before the company is even on the verge of losing momentum. ‘silver.
According to the company’s models, the charge rate could increase almost 2.5 times to 20.8% before the company becomes unprofitable. Additionally, should this extremely unlikely scenario materialize, goeasy has the ability to be flexible and further reduce operating expenses.
So, with stocks trading so cheap and selling far more than bank stocks due to market uncertainty, this must be one of the best stocks to buy now.
goeasy has just increased its dividend by 38% in the first quarter, marking the eighth consecutive year of increasing its dividend. And this increase was based on the trust that the Board of Directors had in goeasy to continue to experience strong growth.
Goeasy’s numbers show why it offers better growth potential than bank stocks. The company has always had an attractive economy, and now with its rapid growth, it’s easily one of the best stocks to buy now. In addition to its traditional lending services, in recent years goeasy has sought to expand its business on several fronts. While bank stocks may offer some growth, goeasy looks much more attractive.
For example, it aims to be the leading non-bank non-bank auto lender in Canada. It also increased its home equity loans. In fact, in the first quarter, it generated about $50 million in home equity loans, an increase of nearly 100% over the same quarter last year.
Not to mention that his entire business is also growing rapidly. Management already expects it to reach the upper limit of its forecast for 2022, which is a positive sign. That means the company will likely earn just under $1 billion in revenue this year. In addition, he expects to have an operating margin of at least 35%. In addition, he expects his return on equity to be above 22%.
By comparison, bank stocks typically generate a return on equity of between 10% and 15%. Therefore, it certainly seems exceptionally undervaluedespecially with goeasy offering a similar dividend yield and trading online or cheaper than most bank stocks.
So if you’re looking to find a financial stock to add to your portfolio for long-term growth, goeasy is undoubtedly one of the best stocks to buy now.
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Dumb contributor Danial Da Costa has positions in goeasy Ltd. The Motley Fool has no position in any of the stocks mentioned.