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Schnitzer Steel Industries' (NASDAQ:SCHN) investors will be pleased with their notable 60% return over the last three years

One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), which is up 47%, over three years, soundly beating the market return of 18% (not including dividends).

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

View our latest analysis for Schnitzer Steel Industries

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

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During three years of share price growth, Schnitzer Steel Industries achieved compound earnings per share growth of 44% per year. The average annual share price increase of 14% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.23.

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

earnings-per-share-growth
earnings-per-share-growth

We know that Schnitzer Steel Industries has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Schnitzer Steel Industries' financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Schnitzer Steel Industries, it has a TSR of 60% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Schnitzer Steel Industries shareholders are down 34% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 19%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Schnitzer Steel Industries better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Schnitzer Steel Industries you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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