Is goeasy Ltd.’s (TSE:GSY) Future Growth Already Accounted For In Today’s Price?

goeasy Ltd. (TSE:GSY) is considered a high growth stock. However its last closing price of CA$53.31 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

Check out our latest analysis for goeasy

Does the GSY train have any brakes?

The excitement around goeasy’s growth potential is not unfounded. The consensus forecast from 7 analysts is extremely positive with earnings per share estimated to surge from current levels of CA$4.694 to CA$7.671 over the next three years. This results in an annual growth rate of 23%, on average, which signals a market-beating outlook in the upcoming years.

Is GSY’s share price justifiable by its earnings growth?

Stocks like goeasy, with a price-to-earnings (P/E) ratio of 11.36x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that GSY is undervalued relative to the current CA market average of 13.8x , and overvalued based on current earnings compared to the Consumer Finance industry average of 9.39x .

TSX:GSY Price Estimation Relative to Market, August 19th 2019
TSX:GSY Price Estimation Relative to Market, August 19th 2019

We already know that GSY appears to be overvalued when compared to its industry average. However, since goeasy is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 11.36x and expected year-on-year earnings growth of 23% give goeasy an extremely low PEG ratio of 0.49x. So, when we include the growth factor in our analysis, goeasy appears relatively cheap , based on its fundamentals.

What this means for you:

GSY’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are GSY’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has GSY been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of GSY’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.