Today, Nucor Corp (NUE, Financial) experienced a day's loss of -4.1%, and a 3-month loss of -7.71%. With an Earnings Per Share (EPS) of 21.65, the question arises: is the stock Fairly Valued? In the following analysis, we dive deep into the financials and valuation of Nucor Corp to provide an answer to this question.
Introducing Nucor Corp (NUE, Financial)
Nucor Corp is a renowned manufacturer of steel and steel products, with an extensive portfolio that includes direct reduced iron for use in its steel mills. The company's operations are diverse, encompassing international trading and sales companies that buy and sell steel and steel products manufactured by the company and others. Nucor's operating business segments include steel mills, steel products, and raw materials. The steel mills segment is the primary revenue driver, offering 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.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at.
Nucor (NUE, Financial) appears to be fairly valued based on GuruFocus' valuation method. The GF Value estimates the stock's fair value at $143.15, considering three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. At its current price of $148.51 per share, Nucor has a market cap of $36.90 billion, indicating that the stock is fairly valued.
As Nucor is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Assessing Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Nucor has a cash-to-debt ratio of 0.81, which ranks better than 65.53% of 589 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 that have demonstrated consistent profitability over the long term, poses less risk. Nucor has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $37.50 billion and Earnings Per Share (EPS) of $21.65. Its operating margin is 20.52%, which ranks better than 93.06% of 605 companies in the Steel industry. Overall, GuruFocus ranks the profitability of Nucor at 9 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Nucor is 28.7%, which ranks better than 86.9% of 588 companies in the Steel industry. The 3-year average EBITDA growth rate is 70.9%, which ranks better than 89.26% of 512 companies in the Steel industry.
ROIC vs WACC
Profitability can also be evaluated by comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Nucor's ROIC is 25.1 while its WACC came in at 14.06.
Conclusion
Overall, Nucor (NUE, Financial) stock shows every sign of being fairly valued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 89.26% of 512 companies in the Steel industry. To learn more about Nucor stock, you can check out its 30-Year Financials here.
To find out the high quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
