Gapwaves (STO:GAPW B) adds kr109m to market cap in the past 7 days, though investors from five years ago are still down 51%

It is doubtless a positive to see that the Gapwaves AB (publ) (STO:GAPW B) share price has gained some 80% in the last three months. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. Indeed, the share price is down 51% in the period. So we're not so sure if the recent bounce should be celebrated. But it could be that the fall was overdone.

While the stock has risen 17% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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Because Gapwaves 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.

In the last half decade, Gapwaves saw its revenue increase by 22% per year. That's well above most other pre-profit companies. Unfortunately for shareholders the share price has dropped 9% per year - disappointing considering the growth. This could mean high expectations have been tempered, potentially because investors are looking to the bottom line. Given the revenue growth we'd consider the stock to be quite an interesting prospect if the company has a clear path to profitability.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Gapwaves stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that Gapwaves shareholders have received a total shareholder return of 41% over the last year. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Gapwaves better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Gapwaves .

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 Swedish 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.