The five-year decline in earnings for Grid Dynamics Holdings NASDAQ:GDYN) isn't encouraging, but shareholders are still up 55% over that period

The last three months have been tough on Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) shareholders, who have seen the share price decline a rather worrying 38%. But at least the stock is up over the last five years. Unfortunately its return of 55% is below the market return of 91%.

Although Grid Dynamics Holdings has shed US$54m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

We've discovered 2 warning signs about Grid Dynamics Holdings. View them for free.

While Grid Dynamics Holdings made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

For the last half decade, Grid Dynamics Holdings can boast revenue growth at a rate of 24% per year. Even measured against other revenue-focussed companies, that's a good result. It's nice to see shareholders have made a profit, but the gain of 9% over the period isn't that impressive compared to the overall market. That's surprising given the strong revenue growth. It could be that the stock was previously over-priced - but if you're looking for underappreciated growth stocks, these numbers indicate that there might be an opportunity here.

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

We know that Grid Dynamics Holdings has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that Grid Dynamics Holdings shareholders have received a total shareholder return of 25% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. To that end, you should be aware of the 2 warning signs we've spotted with Grid Dynamics Holdings .

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 American 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.