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Those who invested in Gatekeeper Systems (CVE:GSI) five years ago are up 614%

For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Gatekeeper Systems Inc. (CVE:GSI) shares for the last five years, while they gained 614%. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 72% in about a quarter. Anyone who held for that rewarding ride would probably be keen to talk about it.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Gatekeeper Systems

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

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During the five years of share price growth, Gatekeeper Systems moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. 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. We can see that the Gatekeeper Systems share price is down 18% in the last three years. Meanwhile, EPS is up 10% per year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -6% per year.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

We're pleased to report that Gatekeeper Systems shareholders have received a total shareholder return of 249% over one year. That's better than the annualised return of 48% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Gatekeeper Systems better, we need to consider many other factors. For instance, we've identified 1 warning sign for Gatekeeper Systems that you should be aware of.

Of course Gatekeeper Systems 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 Canadian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.