While shareholders of Openbase (KOSDAQ:049480) are in the red over the last three years, underlying earnings have actually grown

Openbase, Inc. (KOSDAQ:049480) shareholders should be happy to see the share price up 11% in the last week. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 36% in the last three years, falling well short of the market return.

On a more encouraging note the company has added ₩7.6b to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

View our latest analysis for Openbase

There is no denying that markets are sometimes efficient, but prices do not always reflect 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, Openbase actually managed to grow EPS by 12% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

With a rather small yield of just 1.0% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 7.3% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Openbase 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).

Take a more thorough look at Openbase's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Openbase had a tough year, with a total loss of 6.1% (including dividends), against a market gain of about 2.5%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Openbase has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.