Stock Analysis

If You Had Bought BlueScope Steel (ASX:BSL) Shares Five Years Ago You'd Have Earned 188% Returns

  •  Updated
ASX:BSL
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is BlueScope Steel Limited (ASX:BSL) which saw its share price drive 188% higher over five years. In the last week shares have slid back 3.5%.

Check out our latest analysis for BlueScope Steel

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over half a decade, BlueScope Steel managed to grow its earnings per share at 1.9% a year. This EPS growth is slower than the share price growth of 24% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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
ASX:BSL Earnings Per Share Growth March 12th 2021

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, BlueScope Steel's TSR for the last 5 years was 201%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that BlueScope Steel shareholders have received a total shareholder return of 82% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 25% per year), it would seem that the stock's performance has improved in recent times. 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 4 warning signs for BlueScope Steel (1 is concerning!) that you should be aware of before investing here.

But note: BlueScope Steel 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 AU exchanges.

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