Strong week for MaxLinear (NASDAQ:MXL) shareholders doesn't alleviate pain of five-year loss

Over the last month the MaxLinear, Inc. (NASDAQ:MXL) has been much stronger than before, rebounding by 33%. But that is little comfort to those holding over the last half decade, sitting on a big loss. In fact, the share price has declined rather badly, down some 51% in that time. So we're not so sure if the recent bounce should be celebrated. We'd err towards caution given the long term under-performance.

While the last five years has been tough for MaxLinear shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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Because MaxLinear 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. 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.

In the last five years MaxLinear saw its revenue shrink by 9.8% per year. That puts it in an unattractive cohort, to put it mildly. Arguably, the market has responded appropriately to this business performance by sending the share price down 9% (annualized) in the same time period. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.

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

MaxLinear is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

MaxLinear shareholders are down 8.7% for the year, but the market itself is up 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 9% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand MaxLinear better, we need to consider many other factors. For instance, we've identified 2 warning signs for MaxLinear that you should be aware of.

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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.