Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Warner Bros. Discovery, Inc. (NASDAQ:WBD) share price is down 39% in the last year. That's disappointing when you consider the market declined 0.5%. However, the longer term returns haven't been so bad, with the stock down 18% in the last three years. The falls have accelerated recently, with the share price down 14% in the last three months. Of course, this share price action may well have been influenced by the 8.7% decline in the broader market, throughout the period.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Warner Bros. Discovery

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unfortunately Warner Bros. Discovery reported an EPS drop of 13% for the last year. This reduction in EPS is not as bad as the 39% share price fall. So it seems the market was too confident about the business, a year ago. Of course, with a P/E ratio of 60.45, the market remains optimistic.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Warner Bros. Discovery's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Warner Bros. Discovery shareholders are down 39% for the year. Unfortunately, that's worse than the broader market decline of 0.5%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. To that end, you should learn about the 3 warning signs we've spotted with Warner Bros. Discovery (including 2 which are significant) .

But note: Warner Bros. Discovery 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 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.