If You Like EPS Growth Then Check Out GK Software (ETR:GKS) Before It's Too Late

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 as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In contrast to all that, I prefer to spend time on companies like GK Software (ETR:GKS), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 GK Software

GK Software's Improving Profits

In the last three years GK Software's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, GK Software's EPS shot from €3.04 to €5.83, over the last year. Year on year growth of 91% is certainly a sight to behold.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. GK Software maintained stable EBIT margins over the last year, all while growing revenue 8.3% to €129m. That's a real positive.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for GK Software.

Are GK Software Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that GK Software insiders own a meaningful share of the business. In fact, they own 46% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have €146m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is GK Software Worth Keeping An Eye On?

GK Software's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering GK Software for a spot on your watchlist. Now, you could try to make up your mind on GK Software by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although GK Software 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.