Investors in Gravity (NASDAQ:GRVY) have unfortunately lost 38% over the last three years

While it may not be enough for some shareholders, we think it is good to see the Gravity Co., Ltd. (NASDAQ:GRVY) share price up 15% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 38% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Gravity

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Although the share price is down over three years, Gravity actually managed to grow EPS by 28% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We note that, in three years, revenue has actually grown at a 21% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Gravity further; while we may be missing something on this analysis, there might also be an opportunity.

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

earnings-and-revenue-growth

This free interactive report on Gravity's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Gravity provided a TSR of 23% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 1.7% endured over half a decade. It could well be that the business is stabilizing. Before forming an opinion on Gravity you might want to consider these 3 valuation metrics.

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.