Magnachip Semiconductor (NYSE:MX) adds US$19m to market cap in the past 7 days, though investors from three years ago are still down 72%

While not a mind-blowing move, it is good to see that the Magnachip Semiconductor Corporation (NYSE:MX) share price has gained 22% in the last three months. But that doesn't change the fact that the returns over the last three years have been stomach churning. The share price has sunk like a leaky ship, down 72% in that time. So it's about time shareholders saw some gains. The thing to think about is whether the business has really turned around.

While the last three years has been tough for Magnachip Semiconductor 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.

View our latest analysis for Magnachip Semiconductor

Given that Magnachip Semiconductor didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. 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 the last three years, Magnachip Semiconductor's revenue dropped 33% per year. That means its revenue trend is very weak compared to other loss making companies. And as you might expect the share price has been weak too, dropping at a rate of 20% per year. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.

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

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. This free report showing analyst forecasts should help you form a view on Magnachip Semiconductor

A Different Perspective

Magnachip Semiconductor shareholders are down 24% for the year, but the market itself is up 20%. 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 9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Magnachip Semiconductor (1 is a bit unpleasant!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.