Investors in FreakOut Holdings (TSE:6094) from three years ago are still down 55%, even after 10% gain this past week

This week we saw the FreakOut Holdings, inc. (TSE:6094) share price climb by 10%. But over the last three years we've seen a quite serious decline. In that time, the share price dropped 55%. Some might say the recent bounce is to be expected after such a bad drop. After all, could be that the fall was overdone.

On a more encouraging note the company has added JP¥921m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

FreakOut Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years, FreakOut Holdings saw its revenue grow by 24% per year, compound. That's well above most other pre-profit companies. In contrast, the share price is down 16% compound, over three years - disappointing by most standards. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can't help wonder if there is an opportunity for those who are willing to dig deeper.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on FreakOut Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in FreakOut Holdings had a tough year, with a total loss of 20%, against a market gain of about 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand FreakOut Holdings better, we need to consider many other factors. For example, we've discovered 1 warning sign for FreakOut Holdings that you should be aware of before investing here.

We will like FreakOut Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.