Yahoo Finance Commercial Metals' (NYSE:CMC) earnings growth rate lags the 29% CAGR delivered to shareholders
Commercial Metals Company (NYSE:CMC) shareholders might be concerned after seeing the share price drop 17% in the last month. In contrast, the return over three years has been impressive. In three years the stock price has launched 104% higher: a great result. After a run like that some may not be surprised to see prices moderate. If the business can perform well for years to come, then the recent drop could be an opportunity.
Since the long term performance has been good but there's been a recent pullback of 7.8%, let's check if the fundamentals match the share price.
Check out our latest analysis for Commercial Metals
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Commercial Metals was able to grow its EPS at 86% per year over three years, sending the share price higher. This EPS growth is higher than the 27% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.96.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Commercial Metals, it has a TSR of 117% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Commercial Metals shareholders have received a total shareholder return of 12% over one year. Of course, that includes the dividend. Having said that, the five-year TSR of 15% a year, is even better. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Commercial Metals has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.
Commercial Metals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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