James River Group Holdings, Ltd. (NASDAQ:JRVR) shareholders should be happy to see the share price up 24% in the last month. But that doesn't change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 79%. Arguably, the recent bounce is to be expected after such a bad drop. Only time will tell if the company can sustain the turnaround.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

James River Group Holdings became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

With a rather small yield of just 1.9% 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 8.4% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating James River Group Holdings further; while we may be missing something on this analysis, there might also be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We know that James River Group Holdings has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on James River Group Holdings

A Different Perspective

Investors in James River Group Holdings had a tough year, with a total loss of 54% (including dividends), against a market gain of about 20%. 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 12% 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. For example, we've discovered 1 warning sign for James River Group Holdings that you should be aware of before investing here.

But note: James River Group Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.