If I told you a stock listed on the public markets in 2014 rose to an all-time high of $93.85, but has since steadily declined by 93% to just $5.69 today, you might think a story about failure is about to follow.

But the company in this case -- GoPro (GPRO) -- is in the midst of executing a turnaround from that very position. The company leads the action-camera industry, but it was plagued by economic challenges throughout 2022. Still, it made substantial progress in its booming subscription segment, and in building its direct-to-consumer (DTC) sales channel.

GoPro stock trades at a big discount to the broader market, and here's why it's a risk-reward proposition investors might not want to miss.

Most of GoPro's issues were out of its control

The broader economy was at the forefront of GoPro's struggles in 2022. Inflation soared throughout the year, which had a twofold effect on consumer electronics companies. First, it drove up their manufacturing costs, and since profit margins are relatively thin for hardware products to begin with, it had a dramatic effect on earnings power. 

Second, and perhaps more serious, was the drop in demand. Consumers are on the front lines when it comes to inflation: They feel it at the gas pump, at the grocery store, and even in their recreational activities. Plus, they have to contend with rapidly rising interest rates at the same time.

A GoPro camera isn't a necessity, it's a luxury, so it's among the first items on the chopping block when consumers look for ways to cut spending. 

The company was also hit by currency headwinds. The dollar climbed in value, which meant GoPro's sales outside of the U.S. were worth less in dollars. For example, the company officially generated $1.09 billion in revenue during 2022, but adjusting for currency fluctuations, the figure would have been $1.14 billion -- a full $50 million higher.

Here's the good news: The U.S. dollar has reversed course over the last few months, and inflation appears to be well past its peak with a clear deceleration underway. 

GoPro made substantial progress across the board in 2022

You might be wondering why I focused so much attention on economic headwinds. Well, GoPro stock collapsed by more than 20% on the day following its 2022 earnings report because its results were relatively sluggish at face value. But an analysis of its business as a whole -- setting aside economic effects that could be short-lived -- shows the company actually did quite well.

Its subscription business, for example, boomed. There were 2.25 million GoPro.com subscribers at the end of 2022, up 43% year over year and above the company's 2.2 million guidance.

These customers pay $49.99 per year for unlimited cloud storage, livestreaming capabilities, and exclusive product discounts. GoPro usage also jumped 15% in 2022, with 15 million unique cameras connected to the company's app. That segment of GoPro's business now generates $100 million in annual recurring revenue with a gross profit margin between 70% and 80%, around double the margin of its hardware segment.

Then there's GoPro's direct-to-consumer (DTC) sales channel. Historically, the company relied on large retailers to sell its cameras, but it now leverages the GoPro.com website to reach customers directly.

In the fourth quarter, DTC accounted for a record-high 40% of total sales. This is key because GoPro gets to keep all of the profits from those sales, rather than splitting them with a third-party retail store. 

Not to mention, the DTC channel gives GoPro a direct line of communication with every customer. The company can more quickly inform them of new product releases, and prompt them to sign up for a subscription. In fact, 90% of customers who buy a camera via GoPro.com attach a subscription, compared to 30% of in-store buyers.

GoPro stock might be a great buy at the current price

There's no denying that GoPro's 2022 revenue of $1.09 billion was a 6% drop compared to 2021. Sure, the economy played a major role, but no investor wants to own a stake in a shrinking business. 

However, for investors who can look past the disappointing number, there might be strong gains on the other side. GoPro is a profitable business, so it's not at risk of requiring a capital injection in the foreseeable future. In fact, it actually returned $40 million to shareholders through share buybacks last year.

The company's $0.47 in adjusted earnings per share places its stock at a price-to-earnings (P/E) multiple of just 12.1 right now. That's 50% cheaper than the P/E of the Nasdaq-100 index, implying the stock would have to double just to trade in line with its peers in the tech industry.

But for that to happen, GoPro will need to prove to investors it can return its overall revenue to growth in 2023. Still, the rapid increase in its highly profitable subscription business and its progress on the DTC side make it an attractive risk-reward proposition at the current price.