On August 14, 2023, Nucor Corp (NUE, Financial) recorded a daily gain of 3.31%, contributing to a 3-month gain of 23.98%. The company's Earnings Per Share (EPS) stands at 21.65. However, with a GuruFocus Fair Value (GF Value) of $143.72, is the stock modestly overvalued? This article provides a detailed valuation analysis of Nucor, helping investors make informed decisions. Read on to find out more.
A Brief Overview of Nucor Corp (NUE, Financial)
Nucor Corp manufactures steel and steel products, with additional operations in producing direct reduced iron for its steel mills. The company's business segments include steel mills, steel products, and raw materials, with the steel mills segment generating maximum revenue. Nucor's current share price is $172.04, indicating a market cap of $42.80 billion, which seems to suggest that the stock may be modestly overvalued.
Understanding the GF Value of Nucor (NUE, Financial)
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It's calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus' valuation method, Nucor (NUE, Financial) appears to be modestly overvalued. As a result, the long-term return of its stock is likely to be lower than its business growth.
Assessing Nucor's Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. Nucor's cash-to-debt ratio of 0.81 ranks better than 66.61% of companies in the Steel industry, indicating strong financial health.
Profitability and Growth of Nucor
Profitable companies, especially those with consistent profitability over the long term, are less risky investments. Nucor's operating margin of 20.52% ranks better than 93.45% of companies in the Steel industry, indicating strong profitability.
Furthermore, the company's growth is commendable. The average annual revenue growth of Nucor is 28.7%, which ranks better than 86.47% of companies in the Steel industry.
ROIC vs WACC: A Measure of Profitability
Comparing a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC) is another way to assess its profitability. For Nucor, the ROIC is 25.1, and the WACC is 13.48, suggesting a healthy profitability level.
Conclusion
In conclusion, Nucor (NUE, Financial) appears to be modestly overvalued. The company's financial condition is strong, and its profitability is robust. For more detailed financial information on Nucor, you can check out its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, consider exploring the GuruFocus High Quality Low Capex Screener.
