When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Latrobe Magnesium Limited (ASX:LMG) shareholders would be well aware of this, since the stock is up 153% in five years. Better yet, the share price has risen 43% in the last week. This could be related to the recent financial results, released less than a week ago -- you can catch up on the most recent data by reading our company report.

Since the stock has added AU$31m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Latrobe Magnesium

Latrobe Magnesium isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Latrobe Magnesium saw its revenue grow at 105% per year. That's well above most pre-profit companies. Meanwhile, its share price performance certainly reflects the strong growth, given the share price grew at 20% per year, compound, during the period. This suggests the market has well and truly recognized the progress the business has made. To our minds that makes Latrobe Magnesium worth investigating - it may have its best days ahead.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Latrobe Magnesium shareholders gained a total return of 2.9% during the year. But that was short of the market average. On the bright side, the longer term returns (running at about 21% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Latrobe Magnesium better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Latrobe Magnesium (of which 1 is a bit unpleasant!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.