Here's Why We Think Gatekeeper Systems (CVE:GSI) Is Well Worth Watching

By
Simply Wall St
Published
July 29, 2021
TSXV:GSI
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Gatekeeper Systems (CVE:GSI). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Gatekeeper Systems

How Fast Is Gatekeeper Systems Growing Its Earnings Per Share?

Over the last three years, Gatekeeper Systems has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, Gatekeeper Systems's EPS soared from CA$0.017 to CA$0.021, in just one year. That's a impressive gain of 26%.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Gatekeeper Systems's EBIT margins were flat over the last year, revenue grew by a solid 13% to CA$20m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
TSXV:GSI Earnings and Revenue History July 29th 2021

Gatekeeper Systems isn't a huge company, given its market capitalization of CA$61m. That makes it extra important to check on its balance sheet strength.

Are Gatekeeper Systems Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. I discovered that the median total compensation for the CEOs of companies like Gatekeeper Systems with market caps under CA$251m is about CA$208k.

Gatekeeper Systems offered total compensation worth CA$175k to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Gatekeeper Systems To Your Watchlist?

For growth investors like me, Gatekeeper Systems's raw rate of earnings growth is a beacon in the night. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. So I'd venture it may well deserve a spot on your watchlist, or even a little further research. It is worth noting though that we have found 2 warning signs for Gatekeeper Systems that you need to take into consideration.

Although Gatekeeper Systems certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.