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Sea's (NYSE:SE) investors will be pleased with their fantastic 450% return over the last five years

Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Sea Limited (NYSE:SE) shares for the last five years, while they gained 450%. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 16% gain in the last three months.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Sea

Sea wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

For the last half decade, Sea can boast revenue growth at a rate of 59% 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 41%(per year) over the same period. It's never too late to start following a top notch stock like Sea, 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.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

Sea is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Sea in this interactive graph of future profit estimates.

A Different Perspective

We regret to report that Sea shareholders are down 52% for the year. Unfortunately, that's worse than the broader market decline of 5.9%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 41% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

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 US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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