Can Voestalpine's Core Quality Pull The Valuation Up Off The Mat?

In a generally bad year for steel stocks, Austria’s voestalpine (OTCPK:VLPNY) (VOE.VI) has done even worse than most. While the company was once praised for management’s policy of continual reinvest in the business and focus on growth-oriented, high-value businesses, that has all gone by the boards now that near-term results are looking weaker than previously expected.

Much of what I’ve said recently about other steel stocks applies here – for all of voestalpine’s quality and apparently low valuation, it’s tough for steel stocks to outperform when steel prices are declining. Yet, I struggle to reconcile why voestalpine should trade at less than 5x my 12-month forward EBITDA estimate (which is about 5% below the sell-side average). Although I’m reluctant to play chicken with a freight train and go against such strongly negative sentiment as is dominating steel today, the valuation on voestalpine has more sorely tempted to take a flyer on the assumption that 2019/2020 won’t be as bad as the price seems to be forecasting.

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Can Voestalpine's Core Quality Pull The Valuation Up Off The Mat?