Earnings are growing at Opera (NASDAQ:OPRA) but shareholders still don't like its prospects

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Opera Limited (NASDAQ:OPRA) share price is down 39% in the last year. That's disappointing when you consider the market returned 21%. On the bright side, the stock is actually up 15% in the last three years. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Opera

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Even though the Opera share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

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.

We don't see any weakness in the Opera's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Of course, it could simply be that it simply fell short of the market consensus expectations.

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

We know that Opera has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Opera's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Opera, it has a TSR of -35% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Opera had a tough year, with a total loss of 35% (including dividends), against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 6%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Opera you should know about.

We will like Opera 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 American 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.

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