Earnings are growing at Oriental Land (TSE:4661) but shareholders still don't like its prospects

The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Unfortunately the Oriental Land Co., Ltd. (TSE:4661) share price slid 33% over twelve months. That's disappointing when you consider the market returned 15%. At least the damage isn't so bad if you look at the last three years, since the stock is down 8.5% in that time. Furthermore, it's down 15% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Since Oriental Land has shed JP¥361b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Oriental Land

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate twelve months during which the Oriental Land share price fell, it actually saw its earnings per share (EPS) improve by 2.1%. Of course, the situation might betray previous over-optimism about growth.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But looking to other metrics might better explain the share price change.

Given the yield is quite low, at 0.4%, we doubt the dividend can shed much light on the share price. Oriental Land's revenue is actually up 12% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Oriental Land is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Oriental Land will earn in the future (free analyst consensus estimates)

A Different Perspective

Oriental Land shareholders are down 33% for the year (even including dividends), 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. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. 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. Is Oriental Land cheap compared to other companies? These 3 valuation measures might help you decide.

We will like Oriental Land better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Japanese exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.