Earnings are growing at Onto Innovation (NYSE:ONTO) but shareholders still don't like its prospects

It's normal to be annoyed when stock you own has a declining share price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. The Onto Innovation Inc. (NYSE:ONTO) share price is down 12% in the last year. But that actually beats the market decline of 20%. Onto Innovation may have better days ahead, of course; we've only looked at a one year period. In the last ninety days we've seen the share price slide 26%. But this could be related to the weak market, which is down 17% in the same period.

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 Onto Innovation

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 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).

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

The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.

Onto Innovation's revenue is actually up 46% 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.

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

We know that Onto Innovation has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Onto Innovation stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Given that the broader market dropped 20% over the year, the fact that Onto Innovation shareholders were down 12% isn't so bad. However, the problem arose in the last three months, which saw the share price drop 26%. The recent drop implies that investors are increasingly averse to the stock -- quite possibly due to a deterioration of the business. In times of uncertainty we usually try to focus on the long term fundamental business metrics. 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Onto Innovation , and understanding them should be part of your investment process.

Of course Onto Innovation may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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. 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.