Investors three-year losses continue as Gray Media (NYSE:GTN) dips a further 12% this week, earnings continue to decline

As an investor, mistakes are inevitable. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Gray Media, Inc. (NYSE:GTN), who have seen the share price tank a massive 86% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And over the last year the share price fell 64%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 43% in the last 90 days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Gray Media

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 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.

During the three years that the share price fell, Gray Media's earnings per share (EPS) dropped by 15% each year. This reduction in EPS is slower than the 48% annual reduction in the share price. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 2.15.

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

We know that Gray Media has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Gray Media will grow revenue in the future.

A Different Perspective

Gray Media shareholders are down 62% for the year (even including dividends), but the market itself is up 23%. 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 13% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Gray Media (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

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 American 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.