The past three years for NCSOFT (KRX:036570) investors has not been profitable

While it may not be enough for some shareholders, we think it is good to see the NCSOFT Corporation (KRX:036570) share price up 16% in a single quarter. But over the last three years we've seen a quite serious decline. Indeed, the share price is down a tragic 70% in the last three years. So the improvement may be a real relief to some. Perhaps the company has turned over a new leaf.

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.

Check out our latest analysis for NCSOFT

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

NCSOFT saw its EPS decline at a compound rate of 21% per year, over the last three years. This reduction in EPS is slower than the 33% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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 5.0% in the last year, NCSOFT shareholders lost 18% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. 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 1 warning sign we think you should be aware of.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.