Reliance Steel & Aluminum (NYSE:RS) Has Gifted Shareholders With A Fantastic 127% Total Return On Their Investment
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. Long term Reliance Steel & Aluminum Co. (NYSE:RS) shareholders would be well aware of this, since the stock is up 102% in five years. On top of that, the share price is up 19% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
See our latest analysis for Reliance Steel & Aluminum
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
During five years of share price growth, Reliance Steel & Aluminum achieved compound earnings per share (EPS) growth of 6.4% per year. This EPS growth is lower than the 15% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Reliance Steel & Aluminum's key metrics by checking this interactive graph of Reliance Steel & Aluminum's earnings, revenue and cash flow.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Reliance Steel & Aluminum, it has a TSR of 127% 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
Reliance Steel & Aluminum's TSR for the year was broadly in line with the market average, at 75%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 18% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Reliance Steel & Aluminum you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
