Those who invested in Steel Connect (NASDAQ:STCN) a year ago are up 42%

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the Steel Connect, Inc. (NASDAQ:STCN) share price is up 42% in the last 1 year, clearly besting the market return of around 23% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Unfortunately the longer term returns are not so good, with the stock falling 34% in the last three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Steel Connect

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 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.

Steel Connect was able to grow EPS by 163% in the last twelve months. It's fair to say that the share price gain of 42% did not keep pace with the EPS growth. So it seems like the market has cooled on Steel Connect, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 3.78.

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

earnings-per-share-growth

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

A Different Perspective

We're pleased to report that Steel Connect shareholders have received a total shareholder return of 42% over one year. Notably the five-year annualised TSR loss of 4% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Steel Connect you should be aware of.

We will like Steel Connect better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.

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