October 7, 2022

StrategisChhr

Skillful Business Crafters

Schnitzer Steel Industries (NASDAQ:SCHN) stock performs better than its underlying earnings growth over last three years

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} if the company does well. For instance the Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) share price is 131{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} higher than it was three years ago. How nice for those who held the stock! Also pleasing for shareholders was the 24{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} gain in the last three months.

Since it’s been a strong week for Schnitzer Steel Industries shareholders, let’s have a look at trend of the longer term fundamentals.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.

Schnitzer Steel Industries became profitable within the last three years. Given the importance of this milestone, it’s not overly surprising that the share price has increased strongly.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NasdaqGS:SCHN Earnings Per Share Growth December 24th 2021

We know that Schnitzer Steel Industries has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Schnitzer Steel Industries, it has a TSR of 153{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It’s nice to see that Schnitzer Steel Industries shareholders have received a total shareholder return of 68{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} over the last year. And that does include the dividend. That’s better than the annualised return of 18{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} over half a decade, implying that the company is doing better recently. 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. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Schnitzer Steel Industries you should know about.

But note: Schnitzer Steel Industries 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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