Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Headwater Exploration Inc. (TSE:HWX) share price. It's 907% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. In more good news, the share price has risen 18% in thirty days. We love happy stories like this one. The company should be really proud of that performance!

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Headwater Exploration

Given that Headwater Exploration only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Headwater Exploration saw its revenue grow at 19% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 59%(per year) over the same period. Despite the strong run, top performers like Headwater Exploration have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We're pleased to report that Headwater Exploration shareholders have received a total shareholder return of 249% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 59% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 2 warning signs we've spotted with Headwater Exploration (including 1 which is significant) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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.

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