Positive earnings growth hasn't been enough to get Gremi Media (WSE:GME) shareholders a favorable return over the last three years

Gremi Media S.A. (WSE:GME) shareholders should be happy to see the share price up 15% in the last week. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 37% in the last three years, significantly under-performing the market.

The recent uptick of 15% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

See our latest analysis for Gremi Media

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

During the unfortunate three years of share price decline, Gremi Media actually saw its earnings per share (EPS) improve by 28% per year. 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). Alternatively, growth expectations may have been unreasonable in the past.

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

The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Gremi Media the TSR over the last 3 years was -33%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

The last twelve months weren't great for Gremi Media shares, which cost holders 2.0%, including dividends, while the market was up about 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, the longer term story isn't pretty, with investment losses running at 10% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. It's always interesting to track share price performance over the longer term. But to understand Gremi Media better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Gremi Media you should know about.

If you are like me, then you will not want to miss this free list of growing companies 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 PL 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.