Investors in Wrap Technologies (NASDAQ:WRAP) from five years ago are still down 50%, even after 26% gain this past week

It is a pleasure to report that the Wrap Technologies, Inc. (NASDAQ:WRAP) is up 59% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been disappointing. Indeed, the share price is down 50% in the period. So we're hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.

On a more encouraging note the company has added US$29m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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Because Wrap Technologies 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. 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 five years Wrap Technologies saw its revenue shrink by 2.6% per year. That's not what investors generally want to see. With neither profit nor revenue growth, the loss of 8% per year doesn't really surprise us. The chance of imminent investor enthusiasm for this stock seems slimmer than Louise Brooks. Not that many investors like to invest in companies that are losing money and not growing revenue.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's good to see that Wrap Technologies has rewarded shareholders with a total shareholder return of 48% in the last twelve months. That certainly beats the loss of about 8% per year over the last half decade. 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 Wrap Technologies better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Wrap Technologies (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

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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.