Investors bid Golden Matrix Group (NASDAQ:GMGI) up US$114m despite increasing losses YoY, taking five-year CAGR to 60%

We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Golden Matrix Group, Inc. (NASDAQ:GMGI) share price has soared 948% over five years. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 57% gain in the last three months. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since the stock has added US$114m 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 Golden Matrix Group

Because Golden Matrix Group 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 would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Golden Matrix Group can boast revenue growth at a rate of 56% per year. Even measured against other revenue-focussed companies, that's a good result. Arguably, this is well and truly reflected in the strong share price gain of 60%(per year) over the same period. Despite the strong run, top performers like Golden Matrix Group 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).

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. It might be well worthwhile taking a look at our free report on Golden Matrix Group's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Golden Matrix Group shareholders have received a total shareholder return of 76% over one year. That gain is better than the annual TSR over five years, which is 60%. 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. 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 3 warning signs with Golden Matrix Group (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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