Long-term investors looking for a solid Canadian stock with strong fundamentals and significant growth potential could consider goeasy (TSX:GSY), as there are three good reasons why it is a must-buy. Over the last two decades, this financial services company has solidified its position as a leader in Canada's subprime lending sector and delivered exceptional returns, consistently outperforming the benchmark index.

goeasy offers tailored financial solutions for subprime borrowers. Its diverse portfolio includes unsecured and secured loans, lease-to-own services, and the increasingly popular buy-now-pay-later options. These offerings have been driving the company's loan originations and overall revenue growth. Additionally, goeasy's operating leverage has bolstered its profitability, enhancing its bottom line.

goeasy's financial performance has been solid in the last five years (as of September 30, 2024). goeasy achieved a revenue compound annual growth rate (CAGR) of 20.1% and an even more impressive 29% CAGR in adjusted earnings per share (EPS). This consistent growth reflects its robust business model and its ability to grow in all market conditions.

Over the past decade, goeasy's stock has skyrocketed by 894%, delivering a CAGR of 25.8%, far outpacing the broader benchmark index. Its ability to generate value for investors is further reflected in its increased dividend payments.

With this background, let's look at three compelling reasons to buy goeasy stock.

#1. Exceptional growth potential

Even though goeasy stock has appreciated quite a lot, it has significant room for growth, considering its strong financials. As a leading player in Canada's subprime lending sector, goeasy is well-positioned to grow its market share and capitalize on the large, addressable market.

Further, its extensive product portfolio, expanding geographic presence, omnichannel offerings, increasing funding capacity, and diversified funding sources provide a solid base for long-term growth. These factors will likely bolster goeasy's loan portfolio and help generate double-digit revenue growth.

goeasy is seeing solid momentum across its products and customer acquisition channels. Additionally, goeasy's solid credit underwriting capabilities, stable credit performance, and operational efficiencies will likely drive its future earnings potential and support its share price.

#2. Attractive valuation

From a valuation standpoint, goeasy stock trades at an attractive price-to-earnings (P/E) ratio of 8.7 based on its next 12 months' earnings. This multiple is significantly lower than its historical average, presenting a buying opportunity for long-term investors seeking value.

Moreover, the company's fundamentals make its current valuation even more enticing. goeasy offers double-digit earnings growth potential, a healthy dividend yield of 2.8%, and an impressive return on equity (ROE) of 26.4%. These metrics highlight the stock's capacity to deliver income and capital appreciation to shareholders.

#3. Consistent dividend growth

Along with growth and value, goeasy stock offers consistent income. This Canadian financial services company has an impressive track record of dividend payments. In February 2020, goeasy was added to the S&P/TSX Canadian Dividend Aristocrats Index, reflecting its solid dividend history.

Notably, goeasy's dividend increased about 113% from 2020 to 2023. Moreover, the company raised its dividend by 21.9% in February 2024. Overall, goeasy stock has consistently raised its dividends for a decade and is on track to increase it further in the upcoming years.

The bottom line

goeasy is a compelling stock to buy right now. Its leading position in the subprime lending market, attractive valuation, and consistent dividend growth make it an ideal choice for long-term investors.