Real Matters' (TSE:REAL) growing losses don't faze investors as the stock jumps 12% this past week

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Real Matters share price has climbed 68% in five years, easily topping the market return of 46% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 51%.

Since the stock has added CA$48m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Real Matters

Given that Real Matters 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last half decade Real Matters' revenue has actually been trending down at about 2.4% per year. Even though revenue hasn't increased, the stock actually gained 11%, per year, during the same period. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Real Matters

A Different Perspective

It's nice to see that Real Matters shareholders have received a total shareholder return of 51% over the last year. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

But note: Real Matters may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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