whats going on with GSY - Stocktrades Canada

Hi,

I was wondering what are you current thoughts on GSY. I read the recent thread, and dont believe it can be fully explained by ‘volatility’ of a smaller bank. It is down almost half (>43%) in only 7 months inc. 7% today. There must be something more fundamental than mere sentiment no? At the end of the day, It is still an alternate bank with solid business, not a SPAC, so hard to justify dropping by almost half. Is it maybe related to fear of Canadian regulatory pressure? should be avoided? or an opportunity? did they fail in any key aspect?

Thanks

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Asked on April 20, 2022 4:37 pm

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Nothing fundamental has changed about Goeasy. This is a company that has gone through many corrections and is much more volatile than the major banks (Beta of 2.07, suggesting Goeasy is 2x more volatile than the broader market.)

There is a lot of recession worries right now, which is likely factoring into the pricing pressure Goeasy is facing. Rising rates are also a worry. However what's important to note is the company has stated that it is hedged against these rising rates as you've probably read in our report.

If we felt the company should be avoided we'd remove it from the Bull List. Goeasy has gone through some tough economic environments and has prevailed. This is a company that has traded in the 12.1-12.5x range in terms of price to earnings for a decade. Right now it's 30%+ off that number. Historically, it has reverted back to the 12.1-12.5x valuation every time it's had a correction. Obviously impossible to predict the future, but historical numbers can give us some sort of educated prediction.

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Posted by Dan Kent

Answered on April 21, 2022 7:59 am

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