Steel Dynamics (STLD)
continues to operate well in an increasingly challenging market, and I
am relatively bullish on the quality of the management, the quality of
the company, and the prospect for improving market share and
valued-added mix to help offset some of the mounting challenges the
sector is facing.
Cyclical stocks are always
challenging to value, and I find that particularly true when the cycle
starts to roll over. The market generally prices stocks in sectors like
steel on the basis of next year’s EBITDA, but that gets tricky when you
realize that the next year’s EBITDA is likely to be lower than this
year’s, and the next, and so on. Looking at several different
approaches, I think a mid-$30’s to low $40’s fair value is still valid
and reasonable, but 2019 may still have some unwelcome surprises for the
industry if demand starts to flag.
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Steel's Uncertain Outlook Certainly Complicates The Steel Dynamics Story
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