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Timken Steel Corporation (TMST) Hits Fresh High: Is There Still Room to Run?

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Have you been paying attention to shares of TimkenSteel (TMST - Free Report) ? Shares have been on the move with the stock up 5.1% over the past month. The stock hit a new 52-week high of $24.99 in the previous session. TimkenSteel has gained 48.1% since the start of the year compared to the 15.6% move for the Zacks Basic Materials sector and the 35.6% return for the Zacks Steel - Producers industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 24, 2022, TimkenSteel reported EPS of $0.8 versus consensus estimate of $0.6.

For the current fiscal year, TimkenSteel is expected to post earnings of $3.80 per share on $1.38 billion in revenues. This represents a 18.38% change in EPS on a 7.27% change in revenues.

Valuation Metrics

While TimkenSteel has moved to its 52-week high in the recent past, investors need to be asking, what is next for the company? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

TimkenSteel has a Value Score of B. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 6.4X current fiscal year EPS estimates, which is a premium to the peer industry average of 4.7X. On a trailing cash flow basis, the stock currently trades at 4.8X versus its peer group's average of 3.8X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, TimkenSteel currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if TimkenSteel fits the bill. Thus, it seems as though TimkenSteel shares could have a bit more room to run in the near term.


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