Is Now The Time To Put Gamesys Group (LON:GYS) On Your Watchlist?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
So if you're like me, you might be more interested in profitable, growing companies, like Gamesys Group (LON:GYS). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Gamesys Group
How Fast Is Gamesys Group Growing Its Earnings Per Share?
In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Gamesys Group's EPS went from UK£0.11 to UK£0.62 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Gamesys Group maintained stable EBIT margins over the last year, all while growing revenue 75% to UK£728m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Gamesys Group EPS 100% free.
Are Gamesys Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
While Gamesys Group insiders did net -UK£89.4 selling stock over the last year, they invested UK£345k, a much higher figure. On balance, to me, this signals their optimism. We also note that it was the COO & Director, Robeson Reeves, who made the biggest single acquisition, paying UK£229k for shares at about UK£6.53 each.
The good news, alongside the insider buying, for Gamesys Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at UK£411m. That equates to 26% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Lee Fenton, is paid less than the median for similar sized companies. For companies with market capitalizations between UK£720m and UK£2.3b, like Gamesys Group, the median CEO pay is around UK£1.2m.
Gamesys Group offered total compensation worth UK£635k to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.
Should You Add Gamesys Group To Your Watchlist?
Gamesys Group's earnings have taken off like any random crypto-currency did, back in 2017. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest Gamesys Group belongs on the top of your watchlist. You should always think about risks though. Case in point, we've spotted 3 warning signs for Gamesys Group you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Gamesys Group, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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