Despite currently being unprofitable, Alpha and Omega Semiconductor (NASDAQ:AOSL) has delivered a 60% return to shareholders over 5 years

It's been a soft week for Alpha and Omega Semiconductor Limited (NASDAQ:AOSL) shares, which are down 10%. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 60%, less than the market return of 97%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 26% decline over the last twelve months.

While the stock has fallen 10% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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Alpha and Omega Semiconductor 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 desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Alpha and Omega Semiconductor saw its revenue grow at 3.3% per year. That's not a very high growth rate considering the bottom line. Like its revenue, its share price gained over the period. The increase of 10% per year probably reflects the modest revenue growth. If profitability is likely in the near term, then this might be one to add to your watchlist.

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

Take a more thorough look at Alpha and Omega Semiconductor's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Alpha and Omega Semiconductor had a tough year, with a total loss of 26%, against a market gain of about 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 10% 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. It's always interesting to track share price performance over the longer term. But to understand Alpha and Omega Semiconductor better, we need to consider many other factors. Take risks, for example - Alpha and Omega Semiconductor has 1 warning sign we think you should be aware of.

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.

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.