Investors three-year losses continue as Ncsoft (KRX:036570) dips a further 8.3% this week, earnings continue to decline

As every investor would know, not every swing hits the sweet spot. But really bad investments should be rare. So consider, for a moment, the misfortune of Ncsoft Corporation (KRX:036570) investors who have held the stock for three years as it declined a whopping 79%. That'd be enough to cause even the strongest minds some disquiet. And more recent buyers are having a tough time too, with a drop of 36% in the last year. The last week also saw the share price slip down another 8.3%.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Ncsoft

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Ncsoft saw its EPS decline at a compound rate of 31% per year, over the last three years. The share price decline of 40% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

While the broader market gained around 4.1% in the last year, Ncsoft shareholders lost 35% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 - Ncsoft has 2 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South Korean exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com