Ciena Corporation (NYSE:CIEN) shareholders might be concerned after seeing the share price drop 13% in the last month. On the bright side the share price is up over the last half decade. However we are not very impressed because the share price is only up 43%, less than the market return of 73%.
Since the long term performance has been good but there's been a recent pullback of 4.5%, let's check if the fundamentals match the share price.
Check out our latest analysis for Ciena
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Ciena's earnings per share are down 22% per year, despite strong share price performance over five years.
Essentially, it doesn't seem likely that investors are focused on 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.
On the other hand, Ciena's revenue is growing nicely, at a compound rate of 4.4% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Ciena is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Ciena in this interactive graph of future profit estimates.
A Different Perspective
Ciena shareholders are up 3.4% for the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 7% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.