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Reliance Steel & Aluminum Co. (RS) Hit a 52 Week High, Can the Run Continue?
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Shares of Reliance Steel (RS - Free Report) have been strong performers lately, with the stock up 14.9% over the past month. The stock hit a new 52-week high of $248.77 in the previous session. Reliance Steel has gained 22.5% since the start of the year compared to the 8% move for the Zacks Industrial Products sector and the 15.1% return for the Zacks Metal Products - Distribution 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 16, 2023, Reliance Steel reported EPS of $5.87 versus consensus estimate of $4.47.
For the current fiscal year, Reliance Steel is expected to post earnings of $18.25 per share on $14 billion in revenues. This represents a -39.19% change in EPS on a -17.75% change in revenues.
Valuation Metrics
While Reliance Steel 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 they provide investors with an additional way to sort 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.
Reliance Steel has a Value Score of B. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 13.6X current fiscal year EPS estimates, which is not in-line with the peer industry average of 13.6X. On a trailing cash flow basis, the stock currently trades at 7X versus its peer group's average of 5X. 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, Reliance Steel currently has a Zacks Rank of #1 (Strong 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 Reliance Steel passes the test. Thus, it seems as though Reliance Steel shares could have a bit more room to run in the near term.
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Reliance Steel & Aluminum Co. (RS) Hit a 52 Week High, Can the Run Continue?
Shares of Reliance Steel (RS - Free Report) have been strong performers lately, with the stock up 14.9% over the past month. The stock hit a new 52-week high of $248.77 in the previous session. Reliance Steel has gained 22.5% since the start of the year compared to the 8% move for the Zacks Industrial Products sector and the 15.1% return for the Zacks Metal Products - Distribution 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 16, 2023, Reliance Steel reported EPS of $5.87 versus consensus estimate of $4.47.
For the current fiscal year, Reliance Steel is expected to post earnings of $18.25 per share on $14 billion in revenues. This represents a -39.19% change in EPS on a -17.75% change in revenues.
Valuation Metrics
While Reliance Steel 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 they provide investors with an additional way to sort 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.
Reliance Steel has a Value Score of B. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 13.6X current fiscal year EPS estimates, which is not in-line with the peer industry average of 13.6X. On a trailing cash flow basis, the stock currently trades at 7X versus its peer group's average of 5X. 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, Reliance Steel currently has a Zacks Rank of #1 (Strong 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 Reliance Steel passes the test. Thus, it seems as though Reliance Steel shares could have a bit more room to run in the near term.