Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Corning Incorporated (NYSE:GLW) shareholders over the last year, as the share price declined 32%. That’s disappointing when you consider the market returned 6.3%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 14% in three years. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Unfortunately Corning reported an EPS drop of 6.4% for the last year. The share price decline of 32% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business.

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Corning the TSR over the last year was -30%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 6.3% in the last year, Corning shareholders lost 30% (even including dividends) . Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 2.4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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.