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5 Steel Stocks That Fit the Value Profile

Using Benjamin Graham's recommended metrics to find value

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John Navin
Oct 19, 2021

Summary

  • These stocks trade with lower price-earnings ratios than the market .
  • 2 are US-based, 2 are Luxembourg-based, 1 is Brazilian.
  • Each one pays a dividend.
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Each one of the stocks on this list is trading at or below book value. These names are also trading with price-earnings ratio that are lower than the overall market. Each has a record of making money and is paying a dividend, proving their abilty to generate cash and thier willingness to return cash to shareholders.

This is the sort of profile for a stock that Benjamin Graham outlined in his classic works on the subject of value investing, "Security Analysis" and "The Intelligent Investor." Thus, investors may be interested in the following steel stocks, as they meet Graham's value criteria.

1. Commercial Metals

Commercial Metals (

CMC, Financial) trades with a price-earnings ratio of 9 compared to the Shiller price-earnings ratio for the S&P 500. which sits at near-record 38. The company can be purchased for a price-to-book-value ratio of 1.67 . The price-to-book-value ratio of the S&P 500 is 4.81.

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Earnings per share growth this year was 46% and the five-year record of EPS growth is 44.8%. Shareholder equity exceeds long-term debt. Commercial Metals pays a 1.51% dividend. The NYSE-listed company is relatively lightly-traded with average daily volume at 886,000 shares.

2. Gerdau

Gerdau (

GGB, Financial) is a Brazil-based steelmaker trading with a price-earnings ratio of just 5.83. The company goes for a price-to-book-value ratio of 1.33.

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Growth in earnings per share this year come in at 96.2%. EPS growth over the last five years is 20.3%. Like Commerical Metals, Gerdau’s long-term debt is less than equity. Investors receive a dividend yield of 4.52%. Average daily volume on the NYSE is 9.27 million shares.

3. ArcelorMittal

ArcelorMittal (

MT, Financial)is headquartered in Luxembourg and trades on the NYSE with a price-earnings ratio of 5.25. The company can be purchased at a 15% discount to its book value.

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Earnings per share this year increased by 73.5%. The past five-year EPS growth rate is 42%. Shareholder equity is greater than long-term debt. The dividend paid by Arcelor Mittal is small at 0.92%. Average daily volume is 4.05 million shares.

4. Ternium

Ternium (

TX, Financial) is another Luxembourg-based steel company that trades on the NYSE with a price-earnings ratio of 3.6.

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The growth in earnings per share this year is 38%. The five-year EPS increase is 149%. Ternium investors receive a dividend yield of 4.75%. This is another steel maker where long-term debt is much less than shareholder equity. It’s relatively lightly traded at just 782,000 shares of average daily volume.

5. Worthington Industries

Worthington Industries has its headquarters in Columbus, Ohio. The price-earnings ratio is 11.69 and it trades at a price-to-book-value ratio of 1.86.

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Earnings per share are up 853% this year. Over the past five years, EPS grew at a 43.3% rate. Worthington is paying a 2.1% dividend yield. Shareholder equity greatly exceeds long-term debt. Large institutions can’t really touch it because it’s so lightly traded with an average daily volume of just 250,000 shares.

These stocks are trading so cheaply because none of them are considered growth stocks, and it’s growth stocks that most large institutional investors are looking for. Those few institutions sticking with a purer value approach are likely to find the above mentioned steel stocks on their screens these days. Nothing is guaranteed, of course, especially with the highly-cyclical steel industry, but these names could benefit from increased global spending on infrastructure, both civil and technology-related.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Not investment advice. Do your own research and always consult with a registered investment advisor before making any decisions.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com
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