The truth is that if you invest for long enough, you’re going to end up with some losing stocks. But long term Wrap Technologies, Inc. (NASDAQ:WRAP) shareholders have had a particularly rough ride in the last three year. Unfortunately, they have held through a 63% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 59% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 14% in thirty days. But this could be related to poor market conditions — stocks are down 9.0% in the same time.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
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 expect to see good revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Wrap Technologies grew revenue at 85% per year. That’s well above most other pre-profit companies. The share price has moved in quite the opposite direction, down 18% over that time, a bad result. It seems likely that the market is worried about the continual losses. When we see revenue growth, paired with a falling share price, we can’t help wonder if there is an opportunity for those who are willing to dig deeper.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Wrap Technologies stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
The last twelve months weren’t great for Wrap Technologies shares, which performed worse than the market, costing holders 59%. Meanwhile, the broader market slid about 8.4%, likely weighing on the stock. The three-year loss of 18% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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 – Wrap Technologies has 3 warning signs we think you should be aware of.
We will like Wrap Technologies better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.