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Pixelworks, Inc. (NASDAQ:PXLW): Does The Earnings Decline Make It An Underperformer?

Simply Wall St

Measuring Pixelworks, Inc.'s (NASDAQ:PXLW) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess PXLW's recent performance announced on 31 December 2018 and compare these figures to its historical trend and industry movements.

View our latest analysis for Pixelworks

Did PXLW perform worse than its track record and industry?

PXLW is loss-making, with the most recent trailing twelve-month earnings of -US$4.6m (from 31 December 2018), which compared to last year has become more negative. However, the company's loss seem to be contracting over the medium term, with the five-year earnings average of -US$8.0m. Each year, for the past five years PXLW has seen an annual increase in operating expense growth, outpacing revenue growth of 7.4%, on average. This adverse movement is a driver of the company's inability to reach breakeven.

Looking at growth from a sector-level, the US semiconductor industry has been growing its average earnings by double-digit 43% in the prior twelve months,

NasdaqGM:PXLW Income Statement, April 24th 2019

Since Pixelworks is currently unprofitable, with operating expenses (opex) growing year-on-year at 1.4%, it may need to raise more cash over the next year. It currently has US$24m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$43m in the latest twelve months. Even though this is analysis is fairly basic, and Pixelworks still can cut its overhead in the near future, or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still helps us understand how sustainable the Pixelworks’s operation is, and when things may have to change.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to predict what will occur going forward, and when. The most valuable step is to assess company-specific issues Pixelworks may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Pixelworks to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for PXLW’s future growth? Take a look at our free research report of analyst consensus for PXLW’s outlook.
  2. Financial Health: Are PXLW’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2018. This may not be consistent with full year annual report figures.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.