While Silex Systems Limited (ASX:SLX) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 17% in the last quarter. But that doesn't displace its brilliant performance over three years. Indeed, the share price is up a whopping 572% in that time. Arguably, the recent fall is to be expected after such a strong rise. The share price action could signify that the business itself is dramatically improved, in that time. Anyone who held for that rewarding ride would probably be keen to talk about it.
While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
Because Silex Systems made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years Silex Systems has grown its revenue at 30% annually. That's well above most pre-profit companies. And it's not just the revenue that is taking off. The share price is up 89% per year in that time. Despite the strong run, top performers like Silex Systems have been known to go on winning for decades. So we'd recommend you take a closer look at this one, or even put it on your watchlist.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Silex Systems' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Silex Systems shareholders are down 15% for the year, but the market itself is up 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Silex Systems better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Silex Systems .
We will like Silex Systems better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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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.