GK Software (ETR:GKS) Shareholders Have Enjoyed An Impressive 203% Share Price Gain

By
Simply Wall St
Published
May 27, 2021
XTRA:GKS
Source: Shutterstock

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of GK Software SE (ETR:GKS) stock is up an impressive 203% over the last five years. On top of that, the share price is up 21% in about a quarter. But this could be related to the strong market, which is up 9.1% in the last three months.

View our latest analysis for GK Software

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years of share price growth, GK Software moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the GK Software share price has gained 25% in three years. Meanwhile, EPS is up 14% per year. This EPS growth is higher than the 8% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
XTRA:GKS Earnings Per Share Growth May 28th 2021

We know that GK Software has improved its bottom line lately, but is it going to grow revenue? Check if analysts think GK Software will grow revenue in the future.

A Different Perspective

We're pleased to report that GK Software shareholders have received a total shareholder return of 122% over one year. That gain is better than the annual TSR over five years, which is 25%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with GK Software , and understanding them should be part of your investment process.

Of course GK Software may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.

If you decide to trade GK Software, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.