Here's Why I Think Goldplat (LON:GDP) Is An Interesting Stock

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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Goldplat (LON:GDP). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Goldplat

How Quickly Is Goldplat Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that Goldplat has grown EPS by 55% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

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 Goldplat's EBIT margins were flat over the last year, revenue grew by a solid 24% to UK£26m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Goldplat isn't a huge company, given its market capitalization of UK£13m. That makes it extra important to check on its balance sheet strength.

Are Goldplat Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We note that Goldplat insiders spent UK£40k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Non-Executive Director, Sango Ntsaluba, who made the biggest single acquisition, paying UK£15k for shares at about UK£0.055 each.

I do like that insiders have been buying shares in Goldplat, but there is more evidence of shareholder friendly management. I refer to the very reasonable level of CEO pay. For companies with market capitalizations under UK£143m, like Goldplat, the median CEO pay is around UK£240k.

Goldplat offered total compensation worth UK£164k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Goldplat Deserve A Spot On Your Watchlist?

Goldplat's earnings per share have taken off like a rocket aimed right at the moon. The company can also boast of insider buying, and reasonable remuneration for the CEO. It could be that Goldplat is at an inflection point, given the EPS growth. If so, then it the potential for further gains probably merit a spot on your watchlist. However, before you get too excited we've discovered 1 warning sign for Goldplat that you should be aware of.

As a growth investor I do like to see insider buying. But Goldplat isn't the only one. You can see a a free list of them here.

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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