Many investors tend to think in months, not years, so giving a stock five years to perform can seem like a long time. Those investors who own shares of Walt Disney (DIS -0.27%) are probably frustrated and wondering if they have waited long enough. That's because Disney stock is roughly the same price it was five years ago. Given that Disney is one of Wall Street's most iconic brands with a booming streaming service in Disney+, investors are asking: What happened?

Disney stock spinning its wheels comes down to a straightforward explanation. I'll tell you what it is, and whether investors should look for the stock to regain its traction anytime soon.

Disney isn't dead, but earnings have eroded

Technically Disney hasn't been flat, even if shares are where they traded back then. Instead, it's been a volatile ride that peaked with most of the market in early 2021. But don't assume that Disney will rebound quickly. Instead, a look at Disney's fundamentals reveals chinks in the armor.

For starters, the company took on debt and diluted investors with new shares when it paid $71 billion to Fox for media assets that it put to use in various ways, including helping launch Disney+. Disney's now paying about $1.4 billion in annual interest expense on that debt, roughly 40% of the company's net income in 2022.

Meanwhile, outstanding shares have increased by 22% over the past five years, which means lower earnings-per-share (EPS). Remember that Disney's still losing money on its streaming service, sacrificing profit to gain subscribers for the past several years.

DIS Total Interest Expense (TTM) Chart

DIS Total Interest Expense (TTM) data by YCharts.

Disney earned just $3.53 per share in 2022, down from $8.36 in 2018. That's a whopping 57% earnings decline. Given that the share price is virtually flat from five years ago, that's a jump in the price-to-earnings ratio (P/E) from 12 in 2018 to 28 today.

How can Disney boost earnings growth?

It's hard to call the stock cheap at a P/E of 28, but growing earnings rapidly could help make that valuation come down faster. Disney+ will play a role in that. The direct-to-consumer segment, which houses Disney's streaming services Disney+, ESPN+, and Hulu, generated $19.5 billion in revenue in 2022, but it had $4 billion in operating losses.

Management reaffirmed its goal of making the business segment profitable in fiscal year 2024, including an ad-supported tier currently in testing. Focusing on profits should help boost Disney's cash flow, enabling it to deleverage a balance sheet that carries 4.1x as much debt as EBITDA, a higher number than the 3x ratio I emphasize.

Make a profit on streaming, raise cash flow, and pay down debt -- all should help earnings grow again. Analysts believe the company can grow EPS by an average of 12% annually over the next three to five years.

Don't rush to buy shares

Disney still needs to follow through and achieve profitability in its streaming business, and the stock's valuation still seems high. The stock traded at a P/E in the teens before the Fox deal. Today, Disney has far more debt, so arguing for a premium value on shares is tough.

The better bet could be waiting for earnings growth to catch up. Growing EPS by 12% annually would have Disney earning roughly $5 per share in 2025, a P/E of 20 at the current share price. That could mean a few years of limited upside for investors.

Disney+ launched the company into the streaming wars, but investors must face the reality that Disney is a less profitable enterprise than before. It might not stay that way, but investors should see some evidence before jumping on board.