O2Micro International Limited (NASDAQ:OIIM) shareholders should be happy to see the share price up 16% in the last month. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 33%, which falls well short of the return you could get by buying an index fund.
O2Micro International 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last half decade, O2Micro International saw its revenue increase by 2.3% per year. That's far from impressive given all the money it is losing. Given this fairly low revenue growth (and lack of profits), it's not particularly surprising to see the stock down 7.7% (annualized) in the same time frame. The key question is whether the company can make it to profitability, and beyond, without trouble. Shareholders will want the company to approach profitability if it can't grow revenue any faster.
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 O2Micro International's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We're pleased to report that O2Micro International shareholders have received a total shareholder return of 9.4% over one year. There's no doubt those recent returns are much better than the TSR loss of 7.7% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand O2Micro International better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with O2Micro International .
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.