While not a mind-blowing move, it is good to see that the Viavi Solutions Inc. (NASDAQ:VIAV) share price has gained 11% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 49% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

If the past week is anything to go by, investor sentiment for Viavi Solutions isn't positive, so let's see if there's a mismatch between fundamentals and 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 three years that the share price fell, Viavi Solutions' earnings per share (EPS) dropped by 50% each year. This fall in the EPS is worse than the 20% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 387.26, it's fair to say the market sees a brighter future for the business.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Viavi Solutions' key metrics by checking this interactive graph of Viavi Solutions's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 22% in the last year, Viavi Solutions shareholders lost 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Case in point: We've spotted 2 warning signs for Viavi Solutions you should be aware of.

But note: Viavi Solutions may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.