Even after rising 14% this past week, Semtech (NASDAQ:SMTC) shareholders are still down 45% over the past three years

It's nice to see the Semtech Corporation (NASDAQ:SMTC) share price up 14% in a week. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 45% in the last three years, significantly under-performing the market.

On a more encouraging note the company has added US$355m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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Semtech 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Semtech grew revenue at 5.2% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. The stock dropped 13% during that time. If revenue growth accelerates, we might see the share price bounce. But ultimately the key will be whether the company can become profitability.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Semtech 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

Investors in Semtech had a tough year, with a total loss of 13%, against a market gain of about 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Semtech better, we need to consider many other factors. For instance, we've identified 2 warning signs for Semtech that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.