Don’t miss out on this under the radar financial stock.

Goeasy Ltd stock analysis:

Goeasy Ltd. is a financial company that is split into to different different areas:

  • easyhome
  • easyfinancial

Easyhome sells furniture and other larger “home” items on a rent-to-own contract.  Easy Financial provides loans to customers, who are unable to qualify for financing or loans through traditional means (bank, line of credit, etc).  Both sides of the business focus on consumers with poor credit and limited options.  The rates are slightly below the maximum allowed, and they market themselves as a better alternative to a payday loan(which they are) but don’t let that fool you, the rates are HIGH.  That said, they have a strong growing business, and whatever your opinion on high cost loans are – I am looking at this strictly from an investing opportunity perspective.

I am going to focus specifically on easyfinancial, since this is the biggest profit center of the business, and the fastest growing.  In fact, revenue for easyhome has slowly been decreasing over the years – but because of the success of easyfinancial the company has continued to blow away expectations.

Goeasy tends to fly under the radar a little bit.  They aren’t included in a lot of Funds/ETF’s, they don’t get talked about a ton by the “experts” or even in the personal finance space online – yet they are quietly and quickly growing at an exceptional pace.  In 2019, their loan portfolio surpassed 1 Billion dollars.  They currently have over 400 locations across 10 provinces, and employ just under 2000 people.  Since 2001, Goeasy has a return of over 6500%!

Goeasy Earnings Per Share

*Source* Goeasy investor presentation 3rd Quarter 2019.

 

Goeasy future growth

Although goeasy has already experienced hyper massive growth over the past decade, I believe there is a good case to be made they are just getting started.  First of all, currently over 90% of their loans originate at their retail branches – I believe they can reduce costs, and increase acquisition by starting to generate a lot more consumers online/working with partners online.

Goeasy has already started partnering with other brands to work on some future deals.

  • In September, goeasy partnered with Paybright which will offer consumers the chance to finance products at the point of sale through easyfinancial.  You can read the full press release HERE.  Paybright has already partnered with close to 5000 merchants across the world.

 

  • Just last month Mogo & goeasy entered into a partnership as well, which will mean some Mogo customers will have their loans funded from easyfinancial(for a fee paid to Mogo) – but the customers will become easyfinancial customers.  This opens up a new acquisition stream of customers, and I expect easyfinancial to continue to make deals like this in the future.

 

  • The majority of loans are being extended to “new” customers.  Which typically means higher acquisition costs and higher bad debt.  As their loan book continues to grow, a higher mix will be repeat customers, which should bring the costs and risk down significantly.  Also, as each day passes, they gather more data on their customers and can improve the business dramatically.  Data is king in this game, and goeasy has almost 10 TB of data on over 3.51 million applications.

 

Goeasy Financial possible headwinds

The only real threat I see to the business going forward is regulation.  Currently 91.4% of all loans originating from goeasy are at an average interest rate of 43.5%.  The good news  (for them) is the federal interest rate cap in Canada hasn’t changed in almost 40 years, and goeasy is constantly in talks with governing bodies and industry associations to ensure they are able to have conversations and input if or when any rules do change.
Goeasy is also in the process of introducing different products to attract new customers at lower interest rates, while at the same time giving their current customers an opportunity/incentive to slowly upgrade their interest rate (as they pay back their loans).  According to the most recent investor presentation 33% of customers graduate to prime credit, and 60% of customers improve their credit score.

Another potential headwind that a lot of analysts are bringing up is a possible recession, but honestly, I don’t think a recession will hurt them, in fact it may actually help them with acquisition as more and more people may be in need of financing options.

Goeasy Stock metrics

  • Currently trading at an all time high, however still only trading at 13-14 x Earnings
  • 22.7% Compounded annual growth rate for EPS. Current EPS of 4.74
  • Dividend Yield: 1.91%.  Goeasy has raised the dividend for 5 consecutive years, most recently by 38%
  • Looking at just easyfinancial, revenues have grown from $101 Million in 2014 to $443 Million in 2018.  Total revenues (including easyhome) have gone from $259 Million to $582 Million over the same time period.

Goeasy has a history of achieving and exceeding it’s financial targets.  In fact, in 2018 they revised their targets after exceeding their initial targets – only to achieve all of those as well.  They have some pretty agressive targets over the next 3 years, but based on their history I see no reason why they won’t achieve them.

Goeasy Targets

One last thing I like about goeasy is that insiders own almost a third of the company. They also recently announced a share buy back plan.  With a payout ratio of under 30%, and increasing revenues & EPS, they can either increase the dividend or buyback shares(or both) with ease.

I bought 256 shares of goeasy ($GSY) on August 14 after they had dipped slightly.  I picked up my shares for $51.30, and as of today EXACTLY 3 months later, the stock hit an all time high $65.05, I am currently up 26.82%!  I am long goeasy, and plan to hold or add if it dips again.  I’m sure in 5 years today’s price will still look good, but I am hoping for a bit of a pullback before i pull the trigger again.

Do you own Goeasy? Have you looked at it? What do you think?

Cheers!

Wild Turkey Kentucky Spirit: Bourbon Review

Just a reminder: Each review will follow the same template, and include a score.  Please enjoy responsibly 🙂

This is the first (and so far, only bottle of Wild Turkey I’ve owned/tried).  I picked it up a couple of years ago, and although I’ve had it a few times on its own, and a few other times in cocktails, I haven’t yet sat down and spent an evening with it. So before the bottle runs out, I figured now is as good a time as ever.

Wild Turkey Kentucky Spirit

Date Reviewed: November 7, 2019

Atmosphere: in a rocks glass, at home. Just finished watching an episode of Justified, and Walter Goggins portrayal of Boyd Crowder always makes me want to have a sip of some bourbon.

Distillery: Wild Turkey: Austin Nichols Distillery

Mash:  75% Corn, 13% Rye, 12% Malted Barley

Age: No Age Statement

Type: Bourbon

ABV%: 50.5%

Price I Paid: $79.99 Canadian

Appearance:  Liquid gold, melted caramel

Nose:  Right off the hop it’s smells good.  Nutmeg, vanilla, brown sugar.  Very faint spices and oak.  Little no no alcohol scents.  Swirling it around in the glass really amplifies the scent.  Brown sugar, vanilla, eggnog, and syrup being poured over pancakes come to life after a few swirls, and I start salivating.

Palate:  The first touch on the tongue is very sweet, but a little bit of heat quickly follows.  This has an extremely thick mouth feel at first, almost like you need to chew the air once it’s done.  Once the initial first sip wears off, the second sip goes down a lot smoother.  It is still really sweet, but this time followed by some spices and no heat.  Hints of Pecans, oak, vanilla and brown sugar come through.

Finish: Smooth, and long.  Spices and oak continue to linger, until you take the inevitable next sip.  No burn/heat, incredibly smooth for a 50.5% bourbon.

Conclusions:  The nose and the finish are what sets this bourbon apart.  I highly recommend you to keep swirling this one around the glass, as it really brings out some wonderful aromas.  It’s a sweet, easy sipper, but the price is a little bit high.  For the same price I’d take Blaton’s over this every time.  That said, if it was on sale I’d gladly buy another bottle.  It’s a real good bourbon, but its priced like an exceptional bourbon.

Overall Score:  84/100

 

Cheers.

This Canadian REIT is doing all the right things.

Artis Reit continues to impress

It’s been a rocky ride for this Canadian REIT.  Just last year Artis Reit cut their distribution in half, saw their stock hit a 52 week low and had investors scrambling to sell.  At the time of the distribution cut, they announced a plan to dispose of some non core assets, do a mass share buyback and explore “other opportunities” in other words – look for potential suitors to purchase the REIT.  In the days following the distribution cut he stock dropped to a low of $8.75.

Investors typically fell into two groups at the time.
Group 1: Sell this tire fire, cut our losses and move on.

Group 2: Continue to hold (or add) at these depressed prices, wait for the turnaround/buyout.  Have faith that management will turn things around.

I was a 100% a group 2 guy.  In fact, I even wrote a detailed post about my take on the dividend cut and the future of Artis exactly 1 year ago.  You can read that article HERE

If you don’t want to read the whole thing, here are a few things I said last November, when the stock had fallen to around 9.00.
“We should see a drop in price right away, but as the dust settles, I think in the long run this will in fact be good for the business.  As much as I enjoyed a juicy 9%+ yield, with the current earnings, it was unsustainable.”

“I’d hold and wait for the price to recover.  If the stock does take a big dip in the next day or two – consider loading up.  Keep in mind the net asset value for this Reit right now is 15.11”

Artis REIT 1 year later

It’s been a year since I wrote about Artis.  Let’s see how things played out…

*Spoiler alert* I was right!

Share Buybacks:  Since announcing their intention to repurchase shares, Artis has repurchased the maximum allowable # of shares allowed under the NCIB; a total of 15,959,760 at an average price of 10.84.  This is at a massive discount to the NAV, and the current stock price.

Payout Ratio: Prior to the distribution cut, Artis had a payout ratio of about 110%, which is of course unsustainable.  Fast forward to today, and Artis has an extremely low (for a REIT) AFFO payout ratio of 52.6%.  Keep in mind even after cutting the distribution in half, Artis still pays a respectable 4.44% yield.

Stock Price: After hitting a low of $8.75 after the distribution cut last November, Artis has continued to climb back up.  Although it is nowhere near it’s NAV of $15.72 it opened today at $12.09.  This represents a gain of almost 40% since last November.

1 Year Stock Price Performance of Artis REIT (AX.UN)

Artis REIT Stock performance

Occupancy: Increased occupancy from 92.7% to 93.3%

FFO & AFFO: Increased both FFO & AFFO by 3% and 4.2% respectively from last quarter.

Buy, Sell or Hold?  What to do…

I will continue to hold.  I’ve already weathered the storm, things continue to look good for the future.  I’d also consider adding if this dips below $11.50 again.  I expect Artis to continue buying back shares until while the stock trades at such a discount to the NAV.

There hasn’t been much news on the “exploring other options” front in a while, although I expect they are still exploring options for a possible buyout.   If Artis does get bought out, I would expect the takeout price to be north of $15.50.  In the meantime, I’ll gladly sit back and collect my 4.4% and DRIP a few more shares each month.
Cheers.

 

 

New Stock Purchase: Diversified Royalty

Diversified Royalty Corporation

Today I added to my position in Diversified Royalty.  I’ve already written about this company multiple times, so I wont bore you with what they do, or why I like this company so much.   You can read my previous posts about Diversified Royalty HERE and HERE

Today I picked up 356 shares for 3.04 each in my TFSA account.  I’ve owned Diversified Royalty for a couple of years now, and the only concern I have had with the stock was the payout ratio. Those concerns were alleviated last week, when they announced a new royalty deal with “Nurse Next Door” that would push the payout ratio below 100%.  On top of that, they also announced a small dividend increase of 3.4% as well!  Lastly they also announced a new credit line available to them so they can seek out other royalty deals.

Lots of good news, the only downside was they announced this at end of day Friday, and by the time I got my order in, the stock already jumped over 5%.  Oh well, short term pain for long term gain.

I expect the stock to continue to climb back into the 3.50 range for the next little while, and once another deal is announced and/or a few earnings releases come out, assuming everything goes as planned the stock should continue to climb.  The royalty deals they have in place have all done relatively well (except Airmiles which has been sluggish/flatlining).

Mr. Lube has been a rock star providing strong growth each quarter, Sutton is continuing with slow and steady growth, and the royalty streams of both Mr Mikes & Nurse Next Door are poised to grow by 2% per year.

Dividend Yield & Stock Appreciation

Diversified Royalty currently offers a juicy dividend of 7.83% which will now be fully covered.  This purchase adds $79.03 to my yearly dividend income, although that will increase slightly once the dividend is increased.  I now own 905 shares of Diversified Royalty and will be dripping 5-6 shares per month depending on the stock price.

Cheers.