AXT (NASDAQ:AXTI shareholders incur further losses as stock declines 11% this week, taking three-year losses to 76%

It's not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of AXT, Inc. (NASDAQ:AXTI) investors who have held the stock for three years as it declined a whopping 76%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And over the last year the share price fell 24%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 16% in the last 90 days.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for AXT

AXT isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, AXT's revenue dropped 21% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 21%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

AXT shareholders are down 24% for the year, but the market itself is up 23%. 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 10% 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. Even so, be aware that AXT is showing 1 warning sign in our investment analysis , you should know about...

We will like AXT better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.