With a daily gain of 3.23%, a 3-month loss of -2.14%, and an Earnings Per Share (EPS) (EPS) of 21.65, Nucor Corp (NUE, Financial) has been garnering attention from investors. The question remains, is this stock fairly valued? This article intends to answer that by providing a comprehensive valuation analysis of Nucor (NUE). We encourage you to read on for a more informed investment decision.
Company Introduction
Nucor Corp (NUE, Financial), a prominent manufacturer of steel and steel products, also produces direct reduced iron for use in its steel mills. The company operates international trading and sales companies that buy and sell steel and steel products manufactured by Nucor and others. The steel mills segment of the business, which includes carbon and alloy steel in sheet, bars, structural and plate; steel trading businesses; rebar distribution businesses; and Nucor's equity method investments in NuMit and NJSM, generates the maximum revenue.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's fair trading value. It is derived from three key factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
The stock of Nucor (NUE, Financial) appears to be fairly valued, according to our GF Value calculation. At its current price of $156.64 per share and a market cap of $39 billion, Nucor's stock aligns closely with our estimate of its fair value.
As Nucor is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
The financial strength of a company is a crucial factor to consider before investing. Companies with poor financial strength pose a higher risk of permanent loss. Nucor has a cash-to-debt ratio of 0.81, ranking better than 65.76% of 587 companies in the Steel industry. The overall financial strength of Nucor is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent long-term profitability, poses less risk. Nucor has been profitable for the past 10 years, with an operating margin of 20.52%, ranking better than 93.37% of 603 companies in the Steel industry. Overall, GuruFocus ranks Nucor's profitability at 9 out of 10, indicating strong profitability.
One of the most crucial factors in a company's valuation is its growth. Nucor's average annual revenue growth is 28.7%, ranking better than 86.84% of 585 companies in the Steel industry. Its 3-year average EBITDA growth is 70.9%, ranking better than 89.35% of 507 companies in the Steel industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Nucor's ROIC was 25.1, while its WACC came in at 13.94.
Conclusion
In conclusion, the stock of Nucor (NUE, Financial) shows every sign of being fairly valued. The company's financial condition is strong, its profitability is robust, and its growth ranks better than 89.35% of 507 companies in the Steel industry. To learn more about Nucor stock, you can check out its 30-Year Financials here.
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