What is GSY.TO's Intrinsic value?

goeasy Ltd (GSY.TO) Intrinsic Value Analysis

Executive Summary

As of June 4, 2025, goeasy Ltd's estimated intrinsic value ranges from $130.25 to $605.33 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $605.33 +305.5%
Discounted Cash Flow (5Y) $427.17 +186.2%
Dividend Discount Model (Multi-Stage) $179.29 +20.1%
Dividend Discount Model (Stable) $130.25 -12.7%
Earnings Power Value $414.86 +177.9%

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

With the current market price at $149.28, 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 1.13 1.75
Cost of equity 8.9% 14.8%
Cost of debt 6.3% 6.5%
Tax rate 26.1% 26.6%
Debt/Equity ratio 1.52 1.52
After-tax WACC 6.4% 8.8%

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 $427 $10,664M 73.8%
10-Year Growth $605 $13,557M 56.7%
5-Year EBITDA $380 $9,903M 71.8%
10-Year EBITDA $556 $12,757M 54.0%

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: 11.9%
  • Long-term growth rate: 0.5%
  • Fair value: $179.29 (20.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 14.8% (Low) to 8.9% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $77 to $184
  • Selected fair value: $130.25 (-12.7% 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) 8.8% - 6.4%
Enterprise Value $8,797M - $12,131M
Net Debt $3,726M
Equity Value $5,070M - $8,404M
Outstanding Shares 16M
Fair Value $312 - $518
Selected Fair Value $414.86

Key Financial Metrics

Metric Value
Market Capitalization $2424M
Enterprise Value $6151M
Trailing P/E 9.20
Forward P/E 7.66
Trailing EV/EBITDA 9.90
Current Dividend Yield 313.93%
Dividend Growth Rate (5Y) 32.10%
Debt-to-Equity Ratio 1.52

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% $181.60
Discounted Cash Flow (5Y) 25% $106.79
Dividend Discount Model (Multi-Stage) 20% $35.86
Dividend Discount Model (Stable) 15% $19.54
Earnings Power Value 10% $41.49
Weighted Average 100% $385.27

Investment Conclusion

Based on our comprehensive valuation analysis, goeasy Ltd's weighted average intrinsic value is $385.27, which is approximately 158.1% above the current market price of $149.28.

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.