This month, we saw the Ambarella, Inc. (NASDAQ:AMBA) up an impressive 37%. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 56% in that time. Some might say the recent bounce is to be expected after such a bad drop. The rise has some hopeful, but turnarounds are often precarious.

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.

See our latest analysis for Ambarella

Ambarella 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. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last three years Ambarella saw its revenue shrink by 12% per year. That's not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 16% per year. Of course, it's the future that will determine whether today's price is a good one. We'd be pretty wary of this one until it makes a profit, because we don't specialize in finding turnaround situations.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Ambarella is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Ambarella will earn in the future (free analyst consensus estimates)

A Different Perspective

While the broader market gained around 25% in the last year, Ambarella shareholders lost 6.3%. 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 1.6% over the last half decade. 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. 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. Take risks, for example - Ambarella has 3 warning signs we think you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.