freee K.K (TSE:4478) adds JP¥22b to market cap in the past 7 days, though investors from three years ago are still down 32%

While not a mind-blowing move, it is good to see that the freee K.K. (TSE:4478) share price has gained 16% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 32% in the last three years, significantly under-performing the market.

On a more encouraging note the company has added JP¥22b 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.

See our latest analysis for freee K.K

Given that freee K.K 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. 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.

In the last three years, freee K.K saw its revenue grow by 28% per year, compound. That's well above most other pre-profit companies. The share price drop of 10% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It seems likely that actual growth fell short of shareholders' expectations. Before considering a purchase, investors should consider how quickly expenses are growing, relative to revenue.

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

Take a more thorough look at freee K.K's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that freee K.K shareholders have received a total shareholder return of 19% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.3% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - freee K.K has 1 warning sign we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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