Investors bid Silex Systems (ASX:SLX) up AU$81m despite increasing losses YoY, taking five-year CAGR to 42%

Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. For example, the Silex Systems Limited (ASX:SLX) share price is up a whopping 486% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 29% in about a quarter.

The past week has proven to be lucrative for Silex Systems investors, so let's see if fundamentals drove the company's five-year performance.

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Silex Systems isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Silex Systems saw its revenue grow at 35% per year. Even measured against other revenue-focussed companies, that's a good result. Fortunately, the market has not missed this, and has pushed the share price up by 42% per year in that time. It's never too late to start following a top notch stock like Silex Systems, since some long term winners go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized 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. So it makes a lot of sense to check out what analysts think Silex Systems will earn in the future (free profit forecasts).

A Different Perspective

It's nice to see that Silex Systems shareholders have received a total shareholder return of 62% over the last year. That gain is better than the annual TSR over five years, which is 42%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Silex Systems has 2 warning signs we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.