It is doubtless a positive to see that the Canaan Inc. (NASDAQ:CAN) share price has gained some 47% in the last three months. But that is meagre solace in the face of the shocking decline over three years. The share price has sunk like a leaky ship, down 71% in that time. So it's about time shareholders saw some gains. The thing to think about is whether the business has really turned around.

The recent uptick of 20% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Because Canaan 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. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last three years Canaan saw its revenue shrink by 49% per year. That means its revenue trend is very weak compared to other loss making companies. The swift share price decline at an annual compound rate of 20%, reflects this weak fundamental performance. Never forget that loss making companies with falling revenue can and do cause losses for everyday investors. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.

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 Canaan's financial health with this free report on its balance sheet.

A Different Perspective

Canaan shareholders are down 12% for the year, but the market itself is up 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 9% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Canaan better, we need to consider many other factors.

We will like Canaan better if we see some big insider buys.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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.