Cleveland-Cliffs (NYSE:CLF) shareholders notch a 10% CAGR over 5 years, yet earnings have been shrinking

It hasn't been the best quarter for Cleveland-Cliffs Inc. (NYSE:CLF) shareholders, since the share price has fallen 19% in that time. But the silver lining is the stock is up over five years. Unfortunately its return of 57% is below the market return of 100%. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 40% in the last three years.

Since it's been a strong week for Cleveland-Cliffs shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Cleveland-Cliffs

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Cleveland-Cliffs' earnings per share are down 51% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

On the other hand, Cleveland-Cliffs' revenue is growing nicely, at a compound rate of 36% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Cleveland-Cliffs in this interactive graph of future profit estimates.

What About The Total Shareholder Return (TSR)?

We've already covered Cleveland-Cliffs' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Cleveland-Cliffs shareholders, and that cash payout contributed to why its TSR of 63%, over the last 5 years, is better than the share price return.

A Different Perspective

Cleveland-Cliffs shareholders are down 14% for the year, but the market itself is up 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. 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 Cleveland-Cliffs better, we need to consider many other factors. Even so, be aware that Cleveland-Cliffs is showing 3 warning signs in our investment analysis , and 1 of those is concerning...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.