Steel Dynamics’ (NASDAQ:STLD) investors will be pleased with their impressive 104% return over the last three years

Thanks in no small measure to Vanguard founder Jack Bogle, it’s easy buy a low cost index fund, which should provide the average market return. But if you pick the right individual stocks, you could make more than that. To wit, Steel Dynamics, Inc. (NASDAQ:STLD) shares are up 87% in three years, besting the market return. Also positive was the solid 54% share price increase over the last twelve months.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Steel Dynamics

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

Steel Dynamics was able to grow its EPS at 29% per year over three years, sending the share price higher. This EPS growth is higher than the 23% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. We’d venture the lowish P/E ratio of 5.16 also reflects the negative sentiment around the stock.

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

We know that Steel Dynamics has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Steel Dynamics will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Steel Dynamics’ TSR for the last 3 years was 104%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It’s good to see that Steel Dynamics has rewarded shareholders with a total shareholder return of 57% in the last twelve months. And that does include the dividend. That’s better than the annualised return of 13% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For example, we’ve discovered 3 warning signs for Steel Dynamics (2 don’t sit too well with us!) that you should be aware of before investing here.

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.

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.