Steel Dynamics Inc (STLD, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $121.8, Steel Dynamics Inc has witnessed a daily loss of 0.53%, marked against a three-month change of 17.49%. A thorough analysis, underlined by the GF Score, suggests that Steel Dynamics Inc is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 8/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 8/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, but a lower GF Value rank, GuruFocus assigned Steel Dynamics Inc the GF Score of 92 out of 100, which signals the highest outperformance potential.
Understanding Steel Dynamics Inc Business
Steel Dynamics Inc operates scrap-based steel minimills with roughly 16 million tons of annual steel production capacity. The company's segments include steel operations, metals recycling operations, and steel fabrication operations. It generates maximum revenue from the steel operations segment. With a market cap of $19.71 billion and sales of $18.80 billion, Steel Dynamics Inc boasts an operating margin of 18.21%, reflecting its efficiency and profitability in the steel industry.
Financial Strength Breakdown
According to the Financial Strength rating, Steel Dynamics Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Steel Dynamics Inc stands impressively at 44.76, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With an Altman Z-Score of 5.58, Steel Dynamics Inc exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.16, Steel Dynamics Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Steel Dynamics Inc's impressive standing among its peers in generating profit. The company's Operating Margin has increased significantly over the past five years, with the latest figure standing at 18.21%. Furthermore, Steel Dynamics Inc's Gross Margin has also seen a consistent rise, indicating the company's growing proficiency in transforming revenue into profit. Steel Dynamics Inc's strong Predictability Rank of 3.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Steel Dynamics Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 35.4%, which outperforms better than 91.65% of companies in the Steel industry. Moreover, Steel Dynamics Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years, with a three-year growth rate of 61.4 and a five-year rate of 36.6. This trend accentuates the company's continued capability to drive growth.
Conclusion: A Strong Investment Case
Considering Steel Dynamics Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. The company's robust balance sheet, impressive profitability, and commitment to growth make it a compelling choice for value investors. With a GF Score of 92, Steel Dynamics Inc stands out as a strong candidate for those looking to invest in a company with a proven track record and promising future prospects.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
