At the end of the industry carnival, what other stocks are worth choosing in the iron and steel sector? # US stocks

The 89th original of Xiaoyao Investment School

The iron and steel sector is currently at the peak of the industry cycle, so we should not be confused by short-term ultra-high profits and ultra-low price-to-earnings ratio, but should pay attention to solvency, shareholder earnings and recent average profits.

Overall, the valuation is not high. A total of 5 stocks have been selected.

Steel sector investment index:⭐️⭐️

Star description:
⭐️: the best choice, with obvious profit and growth advantages, and a big discount on the price.
⭐️⭐️: the value or price is slightly lower than the best choice
⭐️: only suitable for certain preferred portfolios, such as ultra-small cap stocks, ultra-fast growth stocks, crisis stocks, defective stocks, etc.

Combination recommendations:
Set the investment quota according to the starFor example, $100 for one star, $200 for two stars, and $400 for three stars
If less than 10, choose only stocks with an investment index of 3 stars.
If there are less than 30, then only 2-star and 3-star stocks are selected.
If more than 30, then 1 star to 3 stars can be selected.

The following is the analysis process 👇

Today is April 27, 2022, Wednesday, before the US stock market, let's take a look at the steel stocks in the US stock market. A total of 21 stocks, the market capitalization from 30 to 42 billion, of which more than 300 million 17, we will study these 17 stocks.

There is only one loss-making stock with a price-to-earnings ratio of less than 0, and another stock with a price-to-earnings ratio of 116. The remaining 15 stocks have a price-to-earnings ratio of between 2 and 11.8. The whole sector is undervalued from an earnings point of view.

However, the iron and steel industry is a typical cyclical stock, ultra-low price-to-earnings ratio combined with ultra-high net profit indicates the end of the industry cycle, which needs to be chosen very carefully.

Let's take a look at the only loss stock.

Algoma Steel（ASTL）It is a Canadian company listed in October 2021, and the fiscal year ends on March 31. Revenue fell 8.3% in 2021, operating profit has reversed to 84.8 million, and net loss has reached 76.1 million. The revenue, operating profit and net profit of 2022Q1, Q2 and Q3 have all increased significantly compared with 2021. The cumulative profit of the first three quarters (March 31 to December 31, 2021) has reached C $615 million, or US $480 million. If combined with 2021Q4, it is actually the first quarter profit of 2021. The natural annual net profit of 2021 reached C $715 million, or US $560 million, and the current market capitalization is 1.39 billion, which is equivalent to2.5Multiple of earnings. The price-to-earnings ratio is 1.87 based on earnings per share.

The income statement is very simple. 2021Q3 has an extra restructuring fee of 200 million, which should be spent on listing. There is a high probability that the profit in fiscal year 2022 will become a regular employee.

Net operating volume barely became regular in 2021 and showed net inflows in the first three quarters of 2022; the situation of free cash flow is similar and the situation has improved significantly.

Recently, the annual investment is about 100 million, and the operating activities can generate 300 million cash flow every quarter, so the development is not a problem.

2021Q3 has a debt-to-asset ratio of 66%, receivables of 455 million and inventory of 620 million, which is normal compared to revenue of 3.5 billion in the past 12 months. The long-term loan is 523 million yuan, with more than 80 million interest, which is not too high compared to the 700 million profit in the past 12 months. The current ratio is 1.75, the quick ratio is 1, and the cash flow is safe.

The company's interest-bearing liabilities have dropped to less than 100 million yuan, and the company has nearly 600 million in cash, which should be able to withstand future cyclical changes.

Taken together, ASTL is a company that has taken a big turn for the better, with both net profit and cash flow improving sharply in the natural year 2021. Because it is a new stock that lacks long-term data, you can choose carefully (⭐️)

Look at the only stock with a price-to-earnings ratio that stands out from the crowd.

Here's a look at 15 stocks with a price-to-earnings ratio of between 2 and 11.8, which looks like the end of a cycle.

Brazilian National Steel (SID)Revenue grew for five years and grew by 59% in 2021; operating profit fell by 9% in 2019, with a five-year average growth rate of 42%; and net profit fluctuated greatly, with a five-year average net profit of 5.1 billion.

Over the past five years, the gross profit margin has risen from 26.6% to 46.1%. The decline in operating profit in 2019 is due to 740 million of other operating expenses in 2019, while the subject's net income in 2018 is 870 million, which distorts the profit ratio for two years. If taken into account, operating profit has continued to grow over the past five years.

In 2018, there was a 940 million of other financial income and 1.76 billion of other net income, so net profit rose significantly, compared with 245 million of other financial expenses and 6.43 of other net expenses in 2019, resulting in a difference of 3.6 billion of operating profit over two years. Due to the interference of these messy projects, coupled with the fact that steel is a typical cyclical stock, we use a five-year average profit of 5.1 billion Brazilian reais, or US $1.02 billion, to calculate a price-to-earnings ratio of5.2.

The asset-liability ratio is 71%, the ratio of receivables to inventory is normal, the current ratio is 1.5, and the quick ratio is 1.

In recent years, the investment is very little, the cash generated by business activities is enough to cover, and there is no problem with development.

Long-term interest-bearing liabilities 27 billion, short-term 5.5 billion, cash 19.3 billion, difference 13.2 billion, there is a certain risk.

At present, the price-to-earnings ratio is 2 times, and the 5-year average profit price-earnings ratio is 5.2, which can be carefully chosen (⭐️).

The gross margin curve is very similar to the operating profit curve, indicating that profits are mainly affected by costs.

The income statement shows that the company has no interest expenses, but has more than 50 million interest income. In 2021, in addition to the gross profit margin increased operating profit, there is also equity income of 400 million yuan, but the impact on net profit is only 10%, or the main business is dominant. The whole income statement looks clean.

The asset-liability ratio is only 28.4%, the asset quality is very good, and there is not much inventory and receivables.

The interest-bearing liability of 660 million is far less than 2.57 billion of the cash on hand.

In the past five years, the cash flow of business activities is 8.2 billion, the total investment is 5.9 billion, the investment is more than one and a half, and the shareholders have less surplus.

Current price-to-earnings ratio of 2, 5-year average profit price-earnings ratio of 4.6, price-to-book ratio of 0.75 discount is not small, although at the end of the cycle can also choose (⭐️⭐️)

The average net profit for 5 years is 4.5 billion, corresponding to5.7Multiple of earnings.

Equity income reached 2.1 billion in 2021, an increase of 1.7 billion over 2020, but it had a modest impact on net profit of 15.6 billion.

The asset-liability ratio is 43.3%, and the annual interest and financial expenses are about 1 billion. The interest-bearing debt is 7.5 billion, which is much higher than 4.2 billion cash, and the risk resistance is weak.

In the past five years, the total investment is 12.8 billion, the total cash flow of business activities is 28.7 billion, the investment is less than half of the cash flow, and the shareholders have more surplus.

The current price-to-earnings ratio of 2.1, the 5-year average profit price-to-earnings ratio of 5.7, price-to-book ratio of 0.5, taken together can still be carefully chosen (⭐️)

The gross margin of American steel is particularly unstable and very low, ranging from 1.88% to 13.21% before 2021 and rising to 28.3% in 2021, which has a big impact on operating profits. The expenses of restructuring and M & A have been increased since 2019, and the impairment of capital assets has been increased since 2020, which has an impact on net profit.

At present, with interest-bearing loans of 3.9 billion yuan and cash of 2.5 billion yuan, the ability to resist risks is weak.

In the past five years, the total investment is 4.7 billion, the total cash flow of business activities is 6.66 billion, the investment is more than half of the cash flow, and the shareholders have less surplus.

The current price-to-earnings ratio of 2.1 times earnings and a five-year average earnings ratio of 10.6 are not very attractive.

The average profit for 5 years is 4.2 billion reais, or US $840 million, corresponding to10.8Multiple of earnings.

The asset-liability ratio is 42%, and receivables are normal compared with inventory and revenue.

Interest-bearing debt of 14.1 billion, cash of 6.8 billion, the ability to resist risk is weak.

In the past five years, the total investment is 5.3 billion, the total cash flow of business activities is 24.6 billion, the proportion of investment in cash flow is very small, and the shareholders have more surplus.

The current price-to-earnings ratio of 2.8 times earnings and a five-year average earnings ratio of 10.8 are not very attractive.

The average net profit for 5 years is 34 million, corresponding to11.7Multiple of earnings.

At present, interest-bearing loans of 330 million, cash of 9.8 million, the ability to resist risk is very weak.

The total investment in the past five years is 120 million, and the cash flow of total operating activities is 24 million of the net outflow. at present, there is no shareholder surplus.

The current price-to-earnings ratio of 3.4 times earnings and the five-year average profit price-earnings ratio of 11.7 are not very attractive.

The asset-liability ratio is 40%, and receivables are normal compared with inventory and revenue.

Interest-bearing debt of 21.74 trillion, cash of 18.16 trillion, the ability to resist risk is weak.

In the past five years, the total investment was 22 trillion, the total cash flow of business activities was 32.43 trillion, the investment accounted for more than half, and the shareholders had less surplus.

At present, the price-to-earnings ratio is 4 times, the 5-year average profit price-earnings ratio is 6.7, and the price-to-earnings ratio is 0.4 times the price-to-net ratio, which can be carefully chosen (⭐️).