Should Discovery (NASDAQ:DISC.A) Be Disappointed With Their 31% Profit?

By
Simply Wall St
Published
June 20, 2021
NasdaqGS:DISC.A
Source: Shutterstock

Discovery, Inc. (NASDAQ:DISC.A) shareholders might understandably be very concerned that the share price has dropped 61% in the last quarter. Looking on the brighter side, the stock is actually up over twelve months. But to be blunt its return of 31% fall short of what you could have got from an index fund (around 40%).

View our latest analysis for Discovery

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

During the last year, Discovery actually saw its earnings per share drop 49%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Unfortunately Discovery's fell 3.1% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NasdaqGS:DISC.A Earnings and Revenue Growth June 21st 2021

Discovery is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

Discovery shareholders gained a total return of 31% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Discovery better, we need to consider many other factors. For instance, we've identified 4 warning signs for Discovery (1 is significant) that you should be aware of.

But note: Discovery 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 US exchanges.

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This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.