Me2on's (KOSDAQ:201490) earnings have declined over five years, contributing to shareholders 57% loss

It is doubtless a positive to see that the Me2on Co., Ltd. (KOSDAQ:201490) share price has gained some 42% in the last three months. But that is little comfort to those holding over the last half decade, sitting on a big loss. In that time the share price has delivered a rude shock to holders, who find themselves down 58% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.

The recent uptick of 33% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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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.

During the five years over which the share price declined, Me2on's earnings per share (EPS) dropped by 44% each year. The impact of extraordinary items helps explain this. This fall in the EPS is worse than the 16% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. With a P/E ratio of 134.56, it's fair to say the market sees a brighter future for the business.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Me2on's key metrics by checking this interactive graph of Me2on's earnings, revenue and cash flow.

A Different Perspective

Me2on shareholders are up 0.8% for the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. It could well be that the business is stabilizing. 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 5 warning signs with Me2on (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

We will like Me2on better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 South Korean 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.