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Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term The Walt Disney Company (NYSE:DIS) shareholders, since the share price is down 46% in the last three years, falling well short of the market return of around 20%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out 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 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.
Walt Disney became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.
The modest 0.6% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 14% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Walt Disney further; while we may be missing something on this analysis, there might also be an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Walt Disney is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. 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
Walt Disney shareholders gained a total return of 4.1% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 1.7% per year, over five years. So this might be a sign the business has turned its fortunes around. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Walt Disney you should know about.
Of course Walt Disney may not be the best stock to buy. So you may wish to see this free collection of growth stocks.