Nucor Has The Right Mix And A Better Valuation

I wasn’t a big fan of Nucor (NUE) back in February, and I don’t feel like I’ve missed out on anything with the 10% move down since then. While Nucor remains one of the best operators in the steel business, prices have weakened as I expected and volume hasn’t made up the difference. What’s worse, costs are rising and I think companies in the steel sector may be counting on more volume/demand recovery in the U.S. than the economy can support.

With the downward move the shares are more interesting now. I still prefer Steel Dynamics (STLD) and Ternium (TX) (though the shares of the latter have been quite weak since February), but Nucor does seem to offer some upside on my EV/EBITDA valuation approach, and Nucor should benefit from oncoming volume/capacity increases in a still-healthy market while others are now investing for capacity that won’t come into play for years.

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Nucor Has The Right Mix And A Better Valuation