Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable, growing companies, like Gateway Real Estate (BST:GTY). Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
How Fast Is Gateway Real Estate Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Gateway Real Estate has managed to grow EPS by 26% per year over three years. If the company can sustain that sort of growth, we’d expect shareholders to come away winners.
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. The good news is that Gateway Real Estate is growing revenues, and EBIT margins improved by 34.3 percentage points to 130%, over the last year. That’s great to see, on both counts.
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.
While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Gateway Real Estate’s balance sheet strength, before getting too excited.
Are Gateway Real Estate Insiders Aligned With All Shareholders?
Should You Add Gateway Real Estate To Your Watchlist?
For growth investors like me, Gateway Real Estate’s raw rate of earnings growth is a beacon in the night. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Gateway Real Estate is trading on a high P/E or a low P/E, relative to its industry.
Although Gateway Real Estate 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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