Franklin Wireless (NASDAQ:FKWL) shareholders are up 10% this past week, but still in the red over the last five years

While it may not be enough for some shareholders, we think it is good to see the Franklin Wireless Corp. (NASDAQ:FKWL) share price up 26% in a single quarter. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Like a ship taking on water, the share price has sunk 71% in that time. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.

The recent uptick of 10% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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Franklin Wireless isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last five years Franklin Wireless saw its revenue shrink by 34% per year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 11% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Franklin Wireless shareholders have received returns of 15% over twelve months, which isn't far from the general market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 11% over the last five years. While 'turnarounds seldom turn' there are green shoots for Franklin Wireless. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Franklin Wireless (of which 1 doesn't sit too well with us!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.