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Alberto Abaterusso
Alberto Abaterusso
Articles (2207) 

3 Steel Companies Investors Should Consider

Wall Street recommends buying these stocks

September 04, 2019 | About:

Shares of several companies operating in the steel and metal fabrication industry are trading lower amid heightened U.S.-China trade tensions after President Donald Trump imposed a 15% tariff on $112 billion worth of Chinese goods on Sunday.

Global trade tensions have produced a sharp depreciation in the market value of several metal and steel companies over the past year. The Dow Jones U.S. Iron & Steel (DJUSST) Index indicates the sector lost nearly 30% over the same period.

This is because investors, who are worried about trade, softened their positions in metal and steel stocks and increased their holdings of gold and other safe-haven assets.

As a result, value can be found among companies in the steel and metal fabrication industry as of Sept. 3.

To enhance the chances of finding a bargain, investors may want to pick those stocks that are topping the industry in terms of a higher earnings before interest, tax, depreciation and amortization margin. The ratio is the most meaningful indicator of profitability for steel and metal manufacturing companies as they operate in a capital-intensive industry.

In addition, the following securities received moderate buy recommendation ratings from sell-side analysts on Wall Street, which increases the odds of a profitable investment.

The following are the results of my screening.

Universal Stainless & Alloy Products Inc. (NASDAQ:USAP) closed at $15.05 per share on Tuesday for a market capitalization of $132.26 million.

The stock has tumbled 50% over the past 52 weeks through Sept. 3 and is now trading below the 200- and 50-day simple moving average lines, but still near the 100-day line.

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The closing share price on Tuesday was 20.1% above the 52-week low of $12.53 and 101.2% below the 52-week high of $30.28.

The stock has a price-book ratio of 0.55 versus the industry median of 0.7 and an enterprise value-Ebitda ratio of 6.47 versus the industry median of 7.23. The stock appears to be cheap.

Universal Stainless & Alloy Products has an Ebitda margin of 12.05% versus the industry median of 8%.

The company has a 5.5 out of 10 rating for financial strength and a 5 out of 10 rating for its profitability and growth.

Analysts issued a moderate buy rating with an average target price of $22,implying 46.2% upside from Tuesdays closing price.

Read more here:

Shares of Gerdau SA (NYSE:GGB) closed at $2.97 on Tuesday for a market capitalization of $4.86 billion.

The stock has declined 18% to below the 200-, 100- and 50-day simple moving average lines over the past year.

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The closing share price on Tuesday was 8.8% above the 52-week low of $2.73 and 58.6% below the 52-week high of $4.71.

The stock has a price-book ratio of 0.79 versus the industry median of 0.7 and an enterprise value-Ebitda ratio of 6.09 versus the industry median of 7.23. The stock appears to be cheap.

Gerdau has an Ebitda margin of 12.5% versus the industry median of 8%.

The company has a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.

Analysts issued a moderate buy rating for shares of Gerdau.

Carpenter Technology Corp. (NYSE:CRS) closed at $46.89 per share on Tuesday for a market capitalization of $2.23 billion. Even though the stock has fallen 17% over the past year, it is still trading above the 200-, 100- and 50-day simple moving average lines.

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The closing price on Tuesday was 43.1% above the 52-week low of $32.77 and 29.6% below the 52-week high of $60.78.

The company has a price-book ratio of 1.48 versus the industry median of 1.47 and an enterprise value-Ebitda ratio of 7.64 versus the industry median of 10.17. The stock appears to be trading cheaply.

Carpenter Technologys Ebitda margin of 15.3% beats the industry median of 10.9%.

The company has a financial strength rating of 5.6 out of 10 and a profitability and growth rating of 7 out of 10.

Analysts issued a moderate buy rating with an average target price of $56, reflecting 19.4% upside from Tuesdays closing price.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about gold, silver and precious metals mining industries. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master's Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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Performances of the stocks mentioned by Alberto Abaterusso


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