Don't judge if it is bad by the color. It is bad if it does one of two things:
1. Grabs at idle. This would mean the springs are most likely shot.
2. Slips at high speeds. This would be quite obvious. You should never cut at anything other than WOT, and the main reason for this is that the clutch can slip, and burn up. If you are pushing the saw so hard that the motor is bogging down and the clutch is slipping, this will eventually burn it up too.