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Timken Steel Corporation (TMST) Soars to 52-Week High, Time to Cash Out?

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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 48.3% over the past month. The stock hit a new 52-week high of $26.22 in the previous session. TimkenSteel has gained 58.7% since the start of the year compared to the 7.9% move for the Zacks Basic Materials sector and the 23.2% return for the Zacks Steel - Producers industry.

What's Driving the Outperformance?

The stock has a great 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 May 4, 2022, TimkenSteel reported EPS of $0.92 versus consensus estimate of $0.81.

For the current fiscal year, TimkenSteel is expected to post earnings of $4.15 per share on $1.52 billion in revenues. This represents a 29.28% change in EPS on a 18.55% change in revenues. For the next fiscal year, the company is expected to earn $3.56 per share on $1.51 billion in revenues. This represents a year-over-year change of -14.22% and -1.02%, respectively.

Valuation Metrics

TimkenSteel may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

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. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

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

In terms of its value breakdown, the stock currently trades at 6.3X current fiscal year EPS estimates, which is a premium to the peer industry average of 3.6X. On a trailing cash flow basis, the stock currently trades at 5.1X versus its peer group's average of 3.7X. 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 look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, TimkenSteel currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

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 meets the list of requirements. Thus, it seems as though TimkenSteel shares could still be poised for more gains ahead.

How Does TMST Stack Up to the Competition?

Shares of TMST have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Commercial Metals Company (CMC - Free Report) . CMC has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of C, and a Momentum Score of C.

Earnings were strong last quarter. Commercial Metals Company beat our consensus estimate by 19.53%, and for the current fiscal year, CMC is expected to post earnings of $8.75 per share on revenue of $8.76 billion.

Shares of Commercial Metals Company have gained 15.2% over the past month, and currently trade at a forward P/E of 4.9X and a P/CF of 8.72X.

The Steel - Producers industry is in the top 13% of all the industries we have in our universe, so it looks like there are some nice tailwinds for TMST and CMC, even beyond their own solid fundamental situation.


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