While it may not be enough for some shareholders, we think it is good to see the SecureWorks Corp. (NASDAQ:SCWX) share price up 14% in a single quarter. But that is small recompense for the exasperating returns over three years. Tragically, the share price declined 57% in that time. So the improvement may be a real relief to some. The rise has some hopeful, but turnarounds are often precarious.

If the past week is anything to go by, investor sentiment for SecureWorks isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for SecureWorks

Because SecureWorks made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

Over the last three years, SecureWorks' revenue dropped 17% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 16% (annualized) in the same time period. Bagholders or 'baggies' are people who buy more of a stock as the price collapses. They are then left 'holding the bag' if the shares turn out to be worthless. It could be a while before the company repays long suffering shareholders with share price gains.

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. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling SecureWorks stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

It's good to see that SecureWorks has rewarded shareholders with a total shareholder return of 38% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand SecureWorks better, we need to consider many other factors. For example, we've discovered 3 warning signs for SecureWorks that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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.