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. To wit, the Silex Systems Limited (ASX:SLX) share price has soared 476% over five years. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 68% over the last quarter.
Since it's been a strong week for Silex Systems shareholders, let's have a look at trend of the longer term fundamentals.
Given that Silex Systems didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
For the last half decade, Silex Systems can boast revenue growth at a rate of 15% per year. That's a fairly respectable growth rate. Arguably it's more than reflected in the very strong share price gain of 42% a year over a half a decade. We usually like strong growth stocks but it does seem the market already appreciates this one quite well!
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for Silex Systems in this interactive graph of future profit estimates.
A Different Perspective
It's nice to see that Silex Systems shareholders have received a total shareholder return of 123% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 42% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Silex Systems , and understanding them should be part of your investment process.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.