What is GSY.TO's Intrinsic value?

goeasy Ltd (GSY.TO) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, goeasy Ltd's estimated intrinsic value ranges from $130.44 to $605.91 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $605.91 +291.9%
Discounted Cash Flow (5Y) $427.60 +176.6%
Dividend Discount Model (Multi-Stage) $181.60 +17.5%
Dividend Discount Model (Stable) $130.44 -15.6%
Earnings Power Value $413.81 +167.6%

Is goeasy Ltd (GSY.TO) undervalued or overvalued?

With the current market price at $154.61, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate goeasy Ltd's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 1.14 1.7
Cost of equity 9.0% 14.5%
Cost of debt 6.3% 6.5%
Tax rate 26.1% 26.6%
Debt/Equity ratio 1.48 1.48
After-tax WACC 6.4% 8.7%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,523 (FY12-2024) to $3,512 (FY12-2034)
  • Net profit margin expansion from 19% to 19%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $428 $10,671M 73.8%
10-Year Growth $606 $13,566M 56.7%
5-Year EBITDA $372 $9,761M 71.4%
10-Year EBITDA $548 $12,622M 53.5%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 28.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 11.8%
  • Long-term growth rate: 0.5%
  • Fair value: $181.60 (17.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 14.5% (Low) to 9.0% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $78 to $183
  • Selected fair value: $130.44 (-15.6% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $771M
Discount Rate (WACC) 8.7% - 6.4%
Enterprise Value $8,856M - $12,038M
Net Debt $3,726M
Equity Value $5,129M - $8,311M
Outstanding Shares 16M
Fair Value $316 - $512
Selected Fair Value $413.81

Key Financial Metrics

Metric Value
Market Capitalization $2511M
Enterprise Value $6237M
Trailing P/E 9.53
Forward P/E 7.93
Trailing EV/EBITDA 9.70
Current Dividend Yield 305.63%
Dividend Growth Rate (5Y) 32.10%
Debt-to-Equity Ratio 1.48

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $181.77
Discounted Cash Flow (5Y) 25% $106.90
Dividend Discount Model (Multi-Stage) 20% $36.32
Dividend Discount Model (Stable) 15% $19.57
Earnings Power Value 10% $41.38
Weighted Average 100% $385.94

Investment Conclusion

Based on our comprehensive valuation analysis, goeasy Ltd's weighted average intrinsic value is $385.94, which is approximately 149.6% above the current market price of $154.61.

Key investment considerations:

  • Strong projected earnings growth (19% to 19% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 32.10%

Given these factors, we believe goeasy Ltd is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.