Even after rising 14% this past week, Lantronix (NASDAQ:LTRX) shareholders are still down 55% over the past three years

Lantronix, Inc. (NASDAQ:LTRX) shareholders should be happy to see the share price up 16% in the last month. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 55% in that time. So it is really good to see an improvement. The rise has some hopeful, but turnarounds are often precarious.

While the stock has risen 14% 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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Given that Lantronix 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, Lantronix saw its revenue grow by 8.5% per year, compound. That's a fairly respectable growth rate. That contrasts with the weak share price, which has fallen 16% compounded, over three years. The market must have had really high expectations to be disappointed with this progress. It would be well worth taking a closer look at the company, to determine growth trends (and balance sheet strength).

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Lantronix in this interactive graph of future profit estimates.

A Different Perspective

Investors in Lantronix had a tough year, with a total loss of 39%, 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 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. 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. Case in point: We've spotted 2 warning signs for Lantronix you should be aware of.

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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.