Chasing Value: Dynamic analysts go both ways on Steel Dynamics Inc. (STLD)

Posted Aug 24th 2007 3:25PM by Sheldon Liber
Filed under: Analyst Reports, Analyst Upgrades and Downgrades, Analyst Initiations, Chasing Value™

A lot has been written about Steel Dynamics Inc. (NASDAQ: STLD) the growing "mini-mill" located in Fort-Wayne Indiana. In the last year it reported sales growth of 48% and many think it is still a bargain at Thursday's closing price of $41.28. I have been watching it for a couple of months and thought it makes for an interesting story.

You will not find consensus among analysts because this was news on May 29, 2007, creating some downward pressure on the stock that day only to be followed by this news the very next day. Ahhh, the joys of investing. Naturally both UBS and Citigroup had their highly-paid analysts digging deeper than us private investors ever could. Their level of analysis must be worthy of a graduate thesis, I'm sure. More recently, like today Merrill Lynch upgrades Nucor, Steel Dynamics to buy. But since they all seem to cancel each other out I thought it was time to do my own back of the napkin review.

Steel may be a cyclical product, but it is not one that is going to go out of style, and with all the infrastructure development already planned and funded worldwide plus continued consolidation in the industry, it seems like a good bet. You can see some of my often repeated criteria; low P/S, low, P/B, pays a dividend (wish it was higher), not much debt, good cash-flow, and ROE higher than the P/E. The following metrics are from AOL Money & Finance which you should always verify before taking any action since I have found some inconsistencies in the data from time to time.

Price-to-earnings P/E: 8.61 (TTM)
Price-to-sales P/S: 1.06 (LFY)
Price-to-book P/B: 3.25 (LFY)
Price-to-cash flow P/CF: 594 (TTM)
Return-on-equity ROE: 37.59 (TTM)
Long Term Debt-to-Equity 46.81 (LFY)
Dividend Yield 1.60%

A year ago the stock had almost reached $70 per share and has since come down.

Chart

Steel Dynamics is still below its 200 day moving average if that matters to some of you. As I write this story it is up almost $3 at $44.10 in afternoon trading. The improved monthly statistics on housing as well as the Merrill Lynch upgrade probably had something to do with this jump.

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

Tags: Sheldon Liber, SheldonLiber, Steel Mills, SteelMills, STLD, Value investing, ValueInvesting