FreightCar America (NASDAQ:RAIL) hikes 13% this week, taking five-year gains to 368%

The last three months have been tough on FreightCar America, Inc. (NASDAQ:RAIL) shareholders, who have seen the share price decline a rather worrying 47%. But that doesn't change the fact that the returns over the last half decade have been spectacular. In that time, the share price has soared some 368% higher! Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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FreightCar America isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. 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 5 years FreightCar America saw its revenue grow at 30% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 36%(per year) over the same period. Despite the strong run, top performers like FreightCar America have been known to go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We're pleased to report that FreightCar America shareholders have received a total shareholder return of 76% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 36% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that FreightCar America is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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