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The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by The Walt Disney Company (NYSE:DIS) shareholders over the last year, as the share price declined 43%. That falls noticeably short of the market decline of around 22%. At least the damage isn't so bad if you look at the last three years, since the stock is down 23% in that time. More recently, the share price has dropped a further 15% in a month. We do note, however, that the broader market is down 11% in that period, and this may have weighed on the share price.
With the stock having lost 8.1% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
See our latest analysis for Walt Disney
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 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.
Even though the Walt Disney share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.
Walt Disney's revenue is actually up 28% over the last year. 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).
Walt Disney is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Walt Disney stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
While the broader market lost about 22% in the twelve months, Walt Disney shareholders did even worse, losing 43%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 0.9% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Walt Disney you might want to consider these 3 valuation metrics.