Even the best stock pickers will make plenty of bad investments. And unfortunately for Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 64% in that time. Notably, shareholders had a tough run over the longer term, too, with a drop of 41% in the last three years. The falls have accelerated recently, with the share price down 13% in the last three months.

Since Grid Dynamics Holdings has shed US$53m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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.

Grid Dynamics Holdings stole the show with its EPS rocketing, in the last year. While the business is unlikely to sustain such a high growth rate for long, it's great to see. As you can imagine, the share price action therefore perturbs us. So it's worth taking a look at some other metrics.

Grid Dynamics Holdings managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

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

A Different Perspective

Grid Dynamics Holdings shareholders are down 64% for the year, but the market itself is up 15%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. 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.

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.

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.