As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Silicon Laboratories Inc. (NASDAQ:SLAB) shareholders have had that experience, with the share price dropping 25% in three years, versus a market return of about 20%.

While the stock has risen 3.7% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

Given that Silicon Laboratories didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Silicon Laboratories grew revenue at 1.5% per year. That's not a very high growth rate considering it doesn't make profits. Indeed, the stock dropped 8% over the last three years. If revenue growth accelerates, we might see the share price bounce. But ultimately the key will be whether the company can become profitability.

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

Take a more thorough look at Silicon Laboratories' financial health with this free report on its balance sheet.

A Different Perspective

Investors in Silicon Laboratories had a tough year, with a total loss of 3.3%, against a market gain of about 30%. 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 0.5% 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

But note: Silicon Laboratories may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.