Stelco $Stelco Holdings Inc.(STZHF)$ is a Canadian integrated steel manufacturer. It was at one time part of the US Steel Group before its divestment and 2017 IPO.
Stelco is in a cyclical sector. As such, I analyzed and valued Stelco based on its performance over the cycle. Given that its data was only available post its 2017 IPO, I took 2018 to 2020 average values to represent the performance over the cycle.
I found its EPV to be CAD $ 42 per share based on this. It is currently trading at CAD $ 34 per share providing a 24 % margin of safety.
It is financially sound with better revenue growth and ROA that its peers. Refer to the charts.
Stelco Peer Revenue: Note CLF growth was due to a large acquisition.
Stelco Peer ROA Comparison
If you are a long-term value investor, this is an investment opportunity as the margin of safety is based on a no-growth scenario. There is a potential growth in the demand for steel in the US. At the same time, the company is fundamentally strong and is able to withstand any downturn in the price cycle.
If you want details on how I estimated the EPV, follow my blog i4value.asia. I will be publishing how I estimated Stelco intrinsic value over the next few weeks.
Comments