I have been looking for value stocks to invest in since the market has been topsy turvy. There are several sectors that contain stocks with compelling valuations. One of the sectors that has been beaten down the most is the steel sector. There are a number of steel stocks that are trading at really low valuations because of the global economic slowdown. These steel stocks could yield big returns for years to come.
US Steel (X) is always a good buy when the stock trades near the teens. The stock has a P/E ratio of 15 and a forward P/E ratio of 5.4. US Steel trades at 0.7 times book value, and 0.2 times sales. U.S. Steel is one of the largest domestic suppliers of steel in the United States. The company’s shares have been battered over the past year losing nearly half their value and dropping 75% over the past three years.
Mittal Steel (MT) is the world’s largest steel company and it shares are tremendously undervalued. Shares are selling at a ridiculous 6.5 times earnings. The stock sells for 0.4 times book value, 0.3 times sales, and 0.2 times earnings growth. The company has a forward P/E ratio below 5 and 10 times free cash flow. This is a stock that could easily double in value over the next year or two. Mittal Steel has a fantastic yield of 4%.
Nucor Steel (NUE) has the best dividend and yield of any of the steel companies with its $1.45 dividend and a 4.5% yield. The company trades at 12.5 times earnings and 9 times forward earnings. Nucor trades at just 1.3 times book value, 0.5 times sales, and 7 times cash flow. Improved demand and higher utilization rates have enabled Nucor to remain competitive in the face of higher raw material costs.
These companies are not quick turnaround plays. They are long term value stocks that should rebound once demand returns to the industrial sector.
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