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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But Pixelworks, Inc. (NASDAQ:PXLW) has fallen short of that second goal, with a share price rise of 94% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 5.1%.
Because Pixelworks 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Pixelworks saw its revenue shrink by 2.8% per year. The falling revenue is arguably somewhat reflected in the lacklustre return of 14% per year over that time. Arguably that's not bad given the soft revenue and loss-making position. Of course, a closer look at the bottom line - and any available analyst forecasts - could reveal an opportunity (if they point to future growth).
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
Pixelworks shareholders gained a total return of 5.1% during the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 14% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Pixelworks better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Pixelworks (at least 1 which is concerning) , and understanding them should be part of your investment process.
But note: Pixelworks 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 US exchanges.
This article by Simply Wall St is general in nature. 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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