Goeasy (GSY), a Canadian financial services provider, has been enjoying a remarkable run.

Goeasy’s rise has been largely due to the incredible demand for BNPL options (Buy Now and Pay Later), as well as high levels of consumer debt. Has the market seen easy money after a record-breaking 114% increase in year-to-date?

Goeasy’s value, while still modest following another record-breaking year in the records books, is hard to overlook. Therefore, I’m bullish.

Goeasy shares trade at 13.9x trailing earnings as of writing. This multiple is hardly possible for a company growing its earnings at an incredible rate. (See GSY stock charts on TipRanks)

Incredible top- and bottom-line growth, alongside a low price-to-earnings multiple suggest investors see risks ahead, or that they don’t think goeasy’s tremendous earnings momentum is sustainable.

Road Ahead

The early stages of an expansionary cycle tend to accompany a spending surge, especially in durable goods like furnishings and other discretionary “nice to have” items. This is exactly what we have seen over the past year as the world economy recovers from the coronavirus recession.

Canadians used their credit cards to purchase everything, from smartphones to expensive furniture and high-end appliances.

The rise of Goeasy means that Canadians with limited credit and cash can finance their purchases using this platform.

Affirm and other BNPL companies like Affirm have made a name for themselves. With the increasing demand for consumer loans, alternatives financial providers such as goeasy may continue to thrive on the backs of the BNPL trends.

It’s difficult to predict when the BNPL trend might lose its momentum. An economic downturn may bring about a slowdown in the trend’s momentum. Although we are likely to be far from the next economic downturn structural, it’s worth noting Canada’s recent GDP dip into the negatives.

Goeasy and the broader BNPL firm basket could see further gains, which could outweigh any future losses. Goeasy may be still undervalued given this possibility.

Wall Street’s Take

According to TipRanks’ analyst consensus rating, GSY stock comes in as a Strong Buy. There are 4 unanimous Buy recommendations out of the four analysts’ ratings.

The average GSY price target is C$193.76. C$193.76 is the average price target for analysts. They can range anywhere from C$182.01 to C$207.01 per sharing.

Bottom Line

Despite having all Buy ratings on the name, the consensus price target suggests 6.8% downside potential from today’s prices.

In reality, analysts may need to increase their price targets or downgrade ratings. With recent momentum and few sore points, I believe the former.

Disclosure: Joey Frenette did not hold shares in the mentioned companies at publication.

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