While not a mind-blowing move, it is good to see that the SecureWorks Corp. (NASDAQ:SCWX) share price has gained 14% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 28% in the last three years, significantly under-performing the market.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
See our latest analysis for SecureWorks
SecureWorks 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 expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last three years SecureWorks saw its revenue shrink by 5.9% per year. That's not what investors generally want to see. The stock has disappointed holders over the last three years, falling 9%, annualized. And with no profits, and weak revenue, are you surprised? However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.
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. If you are thinking of buying or selling SecureWorks stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
SecureWorks shareholders are down 16% for the year, but the market itself is up 6.9%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for SecureWorks you should be aware of.