Hi there,
First off, let me say that I own both of these companies. I have been a long-term shareholder of GSY, and it was one of our first Bull List picks here at Stocktrades Premium. Since we first recommended it, it is up by 184%! When NVEI first went public, we also brought it to investors attention as it was undervalued in comparison to peers. Since it first began trading, it is now up by almost 50% in only a few months. Of note, given the attractive price upon listing, I took a position on the day of open - only the second time I've invested on the first day of an IPO (first was DND).
So, we've had some success with both of these companies - but that was then and this is now.
Let's start with goeasy. One of the fastest growing financials on the Index, goeasy is now trading above historical averages. Across the board, it doesn't matter what metric you are looking at, goeasy is likely trading at a premium to its own five-year historical averages. This in of itself doesn't mean its expensive. For years, goeasy was an attractive value play and as a smaller cap it took some time before the markets began to notice. Today, it is trading at only 12.33 times forward earnings and has a PEG of only 1.26. So it's actually not that expensive. Furthermore, it should continue to post record results as the expectation is for an average of 20% growth over the next couple of years.
Further increasing its attractiveness, GSY is becoming a reliable dividend growth stock. This past year, it joined the list of Canadian Dividend Aristocrats and has averaged 30% annual dividend growth over that period (5yrs). Likewise, it is not impacted by the OFSI's direction to hold dividends steady as it does not fall under its pervu. This means - it is likely to raise dividends next quarter.
As for NVEI, it has closed the gap between itself and its competitors. It's not cheap - trading at 26 times sales and 19 time forward sales but then again, the entire industry is trading at pretty expensive valuations. What sets NVEI apart from some of its payment processing peers, is the company's high exposure to online gambling. It recently received approval for sports betting in Colorado & Indiana and with many more states (and Canada looking to legalize sports betting) NVEI is well positioned to benefit.
With only 1 quarter under its belt as a publicly traded company, NVEI is still a show me stock. That being said, it crushed expectations in its first round. If it continues to top expectations in this way - I'd expect the company to do quite well. It is however, a more risky play as it doesn't have a history of execution. Combine that with rich valuations, and any slip up could hit the company hard. That however, is short-term thinking. Long-term, the company has plenty of opportunities for growth and I'd consider it on a dip.
Of note, both of these companies are highly volatile and as such, carry a higher degree of risk. It can easily jump another 30% or drop by 30% over a very short period of time. It is why for these types - we always think it is best to average into positions.
Mat