Should Value Investors Buy These Steel Stocks?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company to watch right now is ArcelorMittal MT. MT is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 2.95, which compares to its industry's average of 4.35. MT's Forward P/E has been as high as 24.45 and as low as 2.70, with a median of 5.35, all within the past year.
Another valuation metric that we should highlight is ArcelorMittal's P/B ratio of 0.69. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.60. MT's P/B has been as high as 0.82 and as low as 0.36, with a median of 0.68, over the past year.
Finally, investors should note that ArcelorMittal has a P/CF ratio of 5.53. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 10.42. Over the past 52 weeks, ArcelorMittal's P/CF has been as high as 8.92 and as low as 2.96, with a median of 6.46.
Another great steel stock you could consider is United States Steel Corp. X, which is a Zacks Rank #2 (Buy) stock with a Value Score of A.
Shares of U.S. Steel are currently trading at a forward earnings multiple of 1.65 and a PEG ratio of 0.37 compared to its industry's P/E and PEG ratio of 4.05 and 0.28, respectively. Over the past year, X's P/E has been as high as 74.18, as low as -3.71, with a median of 2.40; its PEG has been as high as 9.99, as low as -33.99, with a median of 0.69 during the same time period.
Additionally, U.S. Steel boasts a P/B ratio of 0.98 while its industry's price-to-book ratio sits at 0.95. For X, this valuation metric has been as high as 1.65, as low as 0.54, with a median of 1.15 over the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that ArcelorMittal and U.S. Steel are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MT and X feel like great value stocks at the moment.
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