Rating Change #6

Steel Dynamics Inc ( STLD) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

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Highlights from the ratings report include:
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Metals & Mining industry. The net income has significantly decreased by 70.4% when compared to the same quarter one year ago, falling from $43.30 million to $12.83 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Metals & Mining industry and the overall market, STEEL DYNAMICS INC's return on equity is below that of both the industry average and the S&P 500.
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Steel Dynamics, Inc., together with its subsidiaries, engages in the manufacture and sale of steel products in the United States and internationally. The company operates in three segments: Steel Operations, Metals Recycling and Ferrous Resources Operations, and Steel Fabrication Operations. The company has a P/E ratio of 16.2, below the average metals & mining industry P/E ratio of 17.3 and below the S&P 500 P/E ratio of 17.7. Steel Dynamics has a market cap of $2.77 billion and is part of the basic materials sector and metals & mining industry. Shares are down 4% year to date as of the close of trading on Thursday.

You can view the full Steel Dynamics Ratings Report or get investment ideas from our investment research center.

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