This month, we saw the Calix Limited (ASX:CXL) up an impressive 108%. But the last three years have seen a terrible decline. The share price has sunk like a leaky ship, down 89% in that time. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

While the last three years has been tough for Calix shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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Calix 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. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years, Calix saw its revenue grow by 12% per year, compound. That's a pretty good rate of top-line growth. So it's hard to believe the share price decline of 24% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Calix will earn in the future (free profit forecasts).

A Different Perspective

Investors in Calix had a tough year, with a total loss of 26%, against a market gain of about 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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. 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. 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. Even so, be aware that Calix is showing 4 warning signs in our investment analysis , you should know about...

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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 Australian exchanges.

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