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Introducing Schnitzer Steel Industries (NASDAQ:SCHN), The Stock That Dropped 15% In The Last Year

Simply Wall St

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) share price is down 15% in the last year. That contrasts poorly with the market return of 14%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 10% in three years. In the last ninety days we've seen the share price slide 19%.

View our latest analysis for Schnitzer Steel Industries

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Schnitzer Steel Industries had to report a 8.7% decline in EPS over the last year. The share price decline of 15% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The P/E ratio of 5.69 also points to the negative market sentiment.

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

NasdaqGS:SCHN Past and Future Earnings, October 24th 2019
NasdaqGS:SCHN Past and Future Earnings, October 24th 2019

It is of course excellent to see how Schnitzer Steel Industries has grown profits over the years, but the future is more important for shareholders. This free interactive report on Schnitzer Steel Industries's 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Schnitzer Steel Industries, it has a TSR of -12% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Schnitzer Steel Industries had a tough year, with a total loss of 12% (including dividends) , against a market gain of about 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 2.3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.