NAVER (KRX:035420) shareholders have endured a 26% loss from investing in the stock three years ago

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term NAVER Corporation (KRX:035420) shareholders have had that experience, with the share price dropping 27% in three years, versus a market decline of about 0.2%.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

We check all companies for important risks. See what we found for NAVER in our free report.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Although the share price is down over three years, NAVER actually managed to grow EPS by 8.6% 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.

With a rather small yield of just 0.6% we doubt that the stock's share price is based on its dividend. Revenue is actually up 15% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching NAVER more closely, as sometimes stocks fall unfairly. This could present an opportunity.

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

NAVER is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

It's good to see that NAVER has rewarded shareholders with a total shareholder return of 1.9% in the last twelve months. That's including the dividend. Notably the five-year annualised TSR loss of 1.2% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. Before forming an opinion on NAVER 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 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.