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Gapwaves AB (publ) (STO:GAPW B) shareholders might be concerned after seeing the share price drop 11% in the last quarter. But in three years the returns have been great. Indeed, the share price is up a very strong 101% in that time. It's not uncommon to see a share price retrace a bit, after a big gain. If the business can perform well for years to come, then the recent drop could be an opportunity.
See our latest analysis for Gapwaves
Gapwaves 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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over the last three years Gapwaves has grown its revenue at 16% annually. That's a very respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 26% per year over three years. It's hard to value pre-profit businesses, but it seems like the market has become a lot more optimistic about this one! Some investors like to buy in just after a company becomes profitable, since that can be a powerful inflexion point.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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.
What about the Total Shareholder Return (TSR)?
We've already covered Gapwaves's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Gapwaves hasn't been paying dividends, but its TSR of 107% exceeds its share price return of 101%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We're pleased to report that Gapwaves rewarded shareholders with a total shareholder return of 32% over the last year. That gain actually surpasses the 27% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Gapwaves (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.