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Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Tree Island Steel Ltd. (TSE:TSL) shareholders have enjoyed a 77% share price rise over the last half decade, well in excess of the market return of around 45% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.2% in the last year, including dividends.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Tree Island Steel
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last half decade, Tree Island Steel became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Tree Island Steel's key metrics by checking this interactive graph of Tree Island Steel's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Tree Island Steel's TSR for the last 5 years was 168%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Tree Island Steel shareholders gained a total return of 1.2% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 22% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Tree Island Steel better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Tree Island Steel you should be aware of, and 1 of them makes us a bit uncomfortable.