Nervous Markets Seem To Be Weighing On USAP's Valuation

By most standards these are good times for the specialty alloy companies. The oil/gas markets are recovering, multiple industrial markets continue to expand, and aerospace orders have noticeably picked up. And yet, for companies like Allegheny (ATI), Carpenter (CRS), and Universal Stainless (USAP), it has been a somewhat choppy 2018 as improving backlogs and margin leverage are overshadowed by worries about slowing industrial growth and price momentum in the stainless steel market.

Given USAP’s strong recovery from its late 2015/early 2016 lows, it’s easy to say that a lot of the easy money has been made in the stock. What’s more, I do think there are real signs of slowing activity in multiple industrial markets and mixed signals in stainless steel. On the other hand, I don’t think USAP has reached its peak yet, as I believe there’s more business to come from the aerospace and oil/gas sectors and more margin leverage as well. At close to tangible book value and with upside to around $30, I still see appeal in this very small specialty alloy company.

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Nervous Markets Seem To Be Weighing On USAP's Valuation