The five-year decline in earnings might be taking its toll on Ciena (NYSE:CIEN) shareholders as stock falls 13% over the past week

Ciena Corporation (NYSE:CIEN) shareholders might understandably be very concerned that the share price has dropped 37% in the last quarter. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 17%, less than the market return of 95%.

Since the long term performance has been good but there's been a recent pullback of 13%, let's check if the fundamentals match the share price.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Ciena's earnings per share are down 21% per year, despite strong share price performance over five years.

Since the EPS are down strongly, it seems highly unlikely market participants are looking at EPS to value the company. The falling EPS doesn't correlate with the climbing share price, so it's worth taking a look at other metrics.

In contrast revenue growth of 4.0% per year is probably viewed as evidence that Ciena is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

Ciena is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Ciena stock, you should check out this free report showing analyst consensus estimates for future profits .

A Different Perspective

It's good to see that Ciena has rewarded shareholders with a total shareholder return of 12% in the last twelve months. That's better than the annualised return of 3% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Ciena better, we need to consider many other factors. For instance, we've identified 1 warning sign for Ciena that you should be aware of.

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