SSAB (STO:SSAB A) shareholders have earned a 23% CAGR over the last five years

Simply Wall St · 07/24/2024 07:01

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. One great example is SSAB AB (publ) (STO:SSAB A) which saw its share price drive 111% higher over five years. The last week saw the share price soften some 2.2%.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for SSAB

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).

During the five years of share price growth, SSAB moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
OM:SSAB A Earnings Per Share Growth July 24th 2024

It is of course excellent to see how SSAB has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling SSAB stock, you should check out this FREE detailed report on its balance sheet.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for SSAB the TSR over the last 5 years was 179%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

SSAB shareholders are down 5.8% for the year (even including dividends), but the market itself is up 19%. 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 23%, 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 SSAB better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for SSAB (of which 1 is significant!) you should know about.

We will like SSAB better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

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