Steel Dynamics' (NASDAQ:STLD) five-year earnings growth trails the 33% YoY shareholder returns

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Steel Dynamics, Inc. (NASDAQ:STLD) shareholders would be well aware of this, since the stock is up 271% in five years. Also pleasing for shareholders was the 12% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for Steel Dynamics

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Over half a decade, Steel Dynamics managed to grow its earnings per share at 25% a year. So the EPS growth rate is rather close to the annualized share price gain of 30% per year. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Steel Dynamics has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Steel Dynamics' balance sheet strength is a great place to start, if you want to investigate the stock further.

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 Steel Dynamics, it has a TSR of 318% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Steel Dynamics shareholders gained a total return of 11% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 33% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Steel Dynamics better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Steel Dynamics you should be aware of.

Of course Steel Dynamics may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.