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3 Steel Companies Investors Should Consider

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Shares of several companies operating in the steel and metal fabrication industry are trading lower amid heightened U.S.-China trade tensions after President Donald Trump imposed a 15% tariff on $112 billion worth of Chinese goods on Sunday.

Global trade tensions have produced a sharp depreciation in the market value of several metal and steel companies over the past year. The Dow Jones U.S. Iron & Steel (DJUSST) Index indicates the sector lost nearly 30% over the same period.

This is because investors, who are worried about trade, softened their positions in metal and steel stocks and increased their holdings of gold and other safe-haven assets.

As a result, value can be found among companies in the steel and metal fabrication industry as of Sept. 3.

To enhance the chances of finding a bargain, investors may want to pick those stocks that are topping the industry in terms of a higher earnings before interest, tax, depreciation and amortization margin. The ratio is the most meaningful indicator of profitability for steel and metal manufacturing companies as they operate in a capital-intensive industry.

In addition, the following securities received moderate buy recommendation ratings from sell-side analysts on Wall Street, which increases the odds of a profitable investment.

The following are the results of my screening.

Universal Stainless & Alloy Products Inc. (NASDAQ:USAP) closed at $15.05 per share on Tuesday for a market capitalization of $132.26 million.

The stock has tumbled 50% over the past 52 weeks through Sept. 3 and is now trading below the 200- and 50-day simple moving average lines, but still near the 100-day line.

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The closing share price on Tuesday was 20.1% above the 52-week low of $12.53 and 101.2% below the 52-week high of $30.28.

The stock has a price-book ratio of 0.55 versus the industry median of 0.7 and an enterprise value-Ebitda ratio of 6.47 versus the industry median of 7.23. The stock appears to be cheap.

Universal Stainless & Alloy Products has an Ebitda margin of 12.05% versus the industry median of 8%.

The company has a 5.5 out of 10 rating for financial strength and a 5 out of 10 rating for its profitability and growth.

Analysts issued a moderate buy rating with an average target price of $22, implying 46.2% upside from Tuesday's closing price.

Read more here:



Shares of Gerdau SA (NYSE:GGB) closed at $2.97 on Tuesday for a market capitalization of $4.86 billion.

The stock has declined 18% to below the 200-, 100- and 50-day simple moving average lines over the past year.

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The closing share price on Tuesday was 8.8% above the 52-week low of $2.73 and 58.6% below the 52-week high of $4.71.

The stock has a price-book ratio of 0.79 versus the industry median of 0.7 and an enterprise value-Ebitda ratio of 6.09 versus the industry median of 7.23. The stock appears to be cheap.

Gerdau has an Ebitda margin of 12.5% versus the industry median of 8%.

The company has a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.

Analysts issued a moderate buy rating for shares of Gerdau.

Carpenter Technology Corp. (NYSE:CRS) closed at $46.89 per share on Tuesday for a market capitalization of $2.23 billion. Even though the stock has fallen 17% over the past year, it is still trading above the 200-, 100- and 50-day simple moving average lines.

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The closing price on Tuesday was 43.1% above the 52-week low of $32.77 and 29.6% below the 52-week high of $60.78.

The company has a price-book ratio of 1.48 versus the industry median of 1.47 and an enterprise value-Ebitda ratio of 7.64 versus the industry median of 10.17. The stock appears to be trading cheaply.

Carpenter Technology's Ebitda margin of 15.3% beats the industry median of 10.9%.

The company has a financial strength rating of 5.6 out of 10 and a profitability and growth rating of 7 out of 10.

Analysts issued a moderate buy rating with an average target price of $56, reflecting 19.4% upside from Tuesday's closing price.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.