The 5.9% return this week takes PDF Solutions' (NASDAQ:PDFS) shareholders five-year gains to 68%

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the PDF Solutions, Inc. (NASDAQ:PDFS) share price is up 68% in the last five years, that's less than the market return. Zooming in, the stock is actually down 4.5% in the last year.

Since it's been a strong week for PDF Solutions shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for PDF Solutions

While PDF Solutions made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

For the last half decade, PDF Solutions can boast revenue growth at a rate of 17% per year. Even measured against other revenue-focussed companies, that's a good result. While long-term shareholders have made money, the 11% per year gain over five years fall short of the market return. You could argue the market is still pretty skeptical, given the growing revenues. Arguably this falls in a potential sweet spot - modest share price gains but good top line growth over the long term justifies investigation, in our book.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. 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

While the broader market gained around 26% in the last year, PDF Solutions shareholders lost 4.5%. 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 11% 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. It's always interesting to track share price performance over the longer term. But to understand PDF Solutions better, we need to consider many other factors. Even so, be aware that PDF Solutions is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.