Acerinox Has More To Offer As A Trade

Commodity companies don't easily lend themselves to long-term buy-and-hold strategies, but they can still generate good gains for investors willing to be a bit nimbler with their moves. Acerinox (OTCPK:ANIOY) (ACX.MC) is up more than 50% from its cycle lows in 2015-2016, but these shares still appear to have some upside based on improving stainless steel demand, healthy pricing, and reasonable competition. What's more, while commodity stocks don't really trade on full-cycle cash flows, Acerinox is exiting a capex reinvestment cycle as the market is turning up - a positive development for margins and cash flows.

There is no easy answer to the "right" multiple to use in EV/EBITDA analysis, but I believe an 8x multiple is reasonable for Acerinox, given its place in the cycle and the stainless steel market. With such a multiple, the shares look about 10% undervalued with potential upside from a stronger/longer stainless up-cycle that would support even higher EBITDA estimates.

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Acerinox Has More To Offer As A Trade