When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Ciena Corporation (NYSE:CIEN) share price has soared 198% in the last half decade. Most would be very happy with that. Also pleasing for shareholders was the 40% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
Since the long term performance has been good but there's been a recent pullback of 5.1%, let's check if the fundamentals match the share price.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years of share price growth, Ciena moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Ciena has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Ciena's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Ciena has rewarded shareholders with a total shareholder return of 38% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 24% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Ciena (of which 1 doesn't sit too well with us!) you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.