Strong week for Motorcar Parts of America (NASDAQ:MPAA) shareholders doesn't alleviate pain of five-year loss

Motorcar Parts of America, Inc. (NASDAQ:MPAA) shareholders should be happy to see the share price up 14% in the last week. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Indeed, the share price is down a whopping 71% in that time. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.

On a more encouraging note the company has added US$14m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Check out our latest analysis for Motorcar Parts of America

Motorcar Parts of America isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last half decade, Motorcar Parts of America saw its revenue increase by 8.3% per year. That's a pretty good rate for a long time period. So it is unexpected to see the stock down 11% per year in the last five years. The market can be a harsh master when your company is losing money and revenue growth disappoints.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Motorcar Parts of America's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 40% in the last year, Motorcar Parts of America shareholders lost 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Motorcar Parts of America you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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.