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Is Steel Dynamics (STLD) a Great Stock for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Steel Dynamics, Inc. (STLD - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Steel Dynamics has a trailing twelve months PE ratio of 17.02, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.43. If we focus on the long-term PE trend, Steel Dynamics’ current PE level puts it below its midpoint over the past five years. Moreover, the current level stands significantly below the highs for the stock, suggesting that it could be a great entry point.
Further, the stock’s PE stands a little below the Zacks Basic Materials sector’s trailing twelve months PE ratio, which stands at 17.65. At the very least, this indicates that the stock is slightly undervalued right now, compared to its peers.
We should also point out that Steel Dynamics has a forward PE ratio (price relative to this year’s earnings) of just 10.19, so it is fair to say that a slightly more value-oriented path may be ahead for Steel Dynamics stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Steel Dynamics has a P/S ratio of about 1.13. This is much lower than the S&P 500 average, which comes in at 3.29 right now.
Broad Value Outlook
In aggregate, Steel Dynamics currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Steel Dynamics a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Steel Dynamics is just 0.85, a level that is far lower than the industry average of 0.91. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, STLD is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Steel Dynamics might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of D and a Momentum Score of A. This gives STLD a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one upward and four downward revisions in estimates over the past sixty days, while the full year estimate has seen five upward and no downward revisions in the same time period.
This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has dropped by 5% in the past two months, while the full year estimate has jumped 11.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This indicates that though the company might face some hurdles in the short-run, its ongoing prospects are promising. Driven by these factors, the company with long-term earnings per share growth rate of 12% sports a Zacks Rank #1 (Strong Buy), which is why we are looking for outperformance from the company.
Bottom Line
Steel Dynamics is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, this Zacks Rank #1 company enjoys a solid industry rank (among top 17% out of more than 250 Zacks industries).
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Is Steel Dynamics (STLD) a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Steel Dynamics, Inc. (STLD - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Steel Dynamics has a trailing twelve months PE ratio of 17.02, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.43. If we focus on the long-term PE trend, Steel Dynamics’ current PE level puts it below its midpoint over the past five years. Moreover, the current level stands significantly below the highs for the stock, suggesting that it could be a great entry point.
Further, the stock’s PE stands a little below the Zacks Basic Materials sector’s trailing twelve months PE ratio, which stands at 17.65. At the very least, this indicates that the stock is slightly undervalued right now, compared to its peers.
We should also point out that Steel Dynamics has a forward PE ratio (price relative to this year’s earnings) of just 10.19, so it is fair to say that a slightly more value-oriented path may be ahead for Steel Dynamics stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Steel Dynamics has a P/S ratio of about 1.13. This is much lower than the S&P 500 average, which comes in at 3.29 right now.
Broad Value Outlook
In aggregate, Steel Dynamics currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Steel Dynamics a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Steel Dynamics is just 0.85, a level that is far lower than the industry average of 0.91. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, STLD is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Steel Dynamics might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of D and a Momentum Score of A. This gives STLD a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen one upward and four downward revisions in estimates over the past sixty days, while the full year estimate has seen five upward and no downward revisions in the same time period.
This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has dropped by 5% in the past two months, while the full year estimate has jumped 11.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Steel Dynamics, Inc. Price and Consensus
Steel Dynamics, Inc. Price and Consensus | Steel Dynamics, Inc. Quote
This indicates that though the company might face some hurdles in the short-run, its ongoing prospects are promising. Driven by these factors, the company with long-term earnings per share growth rate of 12% sports a Zacks Rank #1 (Strong Buy), which is why we are looking for outperformance from the company.
Bottom Line
Steel Dynamics is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, this Zacks Rank #1 company enjoys a solid industry rank (among top 17% out of more than 250 Zacks industries).
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>