PDF Solutions (NASDAQ:PDFS) shareholders are up 9.4% this past week, but still in the red over the last year

PDF Solutions, Inc. (NASDAQ:PDFS) shareholders should be happy to see the share price up 12% in the last month. But that is minimal compensation for the share price under-performance over the last year. After all, the share price is down 28% in the last year, significantly under-performing the market.

On a more encouraging note the company has added US$74m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

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Given that PDF Solutions only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last twelve months, PDF Solutions increased its revenue by 18%. That's definitely a respectable growth rate. Unfortunately that wasn't good enough to stop the share price dropping 28%. You might even wonder if the share price was previously over-hyped. But if revenue keeps growing, then at a certain point the share price would likely follow.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling PDF Solutions stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Investors in PDF Solutions had a tough year, with a total loss of 28%, 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 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 PDF Solutions is showing 1 warning sign in our investment analysis , 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.