This U.S.-based steel company hit a new high this week – and the financials still have that value stock look despite the price strength.
With headquarters in Irving, Texas, Commercial Metals Co. (CMC, Financial) has been in business since it began as scrap operation in 1915. The company these days is involved in metals recycling, mill products, fabrication and related areas. Besides here in the States, it’s doing business in Europe and Asia.
According to its website, Commercial Metals “is the United States' largest manufacturer and fabricator of steel reinforcing bar and with core operations in Poland, we are a global leader in concrete reinforcement.”
On Dec.10, 2021, the analysts at JPMorgan upgraded Commercial Metals from “neutral”’ to “overweight,” which no doubt helped the recent upward price performance.
The stock now trades with a price-earnings ratio of 10.54, significantly below the price-earnings ratio of the market taken as whole when measured by the Shiller price-earnings ratio for the S&P 500, which comes in at around 39.
The price-book value for Commercial Metals is 1.87. The price-book ratio for the S&P 500 now sits at 4.82, so again the equity vis a vis the whole stock market appears undervalued. The price-sales ratio is a low 0.64.
Earnings per share this year increased at a 46.30% rate. The earnings per share gain over the past five years is 44.80%. Wall Street is expecting less great growth next year.
Shareholder equity is greater than long-term debt by about 2 to 1, a good sign according to Benjamin Graham-style value methods. The current ratio is positive as well at 2.80.
Commercial Metals pays investors a dividend of 48 cents per share for an annualized yield of 1.35%.
Average daily volume of the stock is about 940,000 shares, relatively light for a New York Stock Exchange-traded company. The short float is 2.05% – if those shorts are ever forced to cover, it could provide some upward momentum.
Commerical Metals thus meets most of the basic standards required to be called a value stock: it’s trading with a price-earnings ratio which is much less than the market as a whole. It’s available for purchase at a reasonable price-book ratio, especially when compared to the much higher book value for the market in general. Earnings per share growth has been on track. The company pays a dividend.
These are some of the basics for a value situation, and right now Commercial Metals seems to meet them.
