Canaan (NASDAQ:CAN) adds US$47m to market cap in the past 7 days, though investors from three years ago are still down 77%

This week we saw the Canaan Inc. (NASDAQ:CAN) share price climb by 17%. But only the myopic could ignore the astounding decline over three years. The share price has sunk like a leaky ship, down 77% in that time. So it's about time shareholders saw some gains. Only time will tell if the company can sustain the turnaround.

While the stock has risen 17% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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Canaan isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last three years, Canaan's revenue dropped 57% 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 21% per year. We prefer leave it to clowns to try to catch falling knives, like this stock. It's worth remembering that investors call buying a steeply falling share price 'catching a falling knife' because it is a dangerous pass time.

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

This free interactive report on Canaan's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Canaan had a tough year, with a total loss of 33%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% 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. It's always interesting to track share price performance over the longer term. But to understand Canaan better, we need to consider many other factors. Take risks, for example - Canaan has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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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.