The steel industry is growing robustly due to high demand for steel products, increased iron ore mining, and advancements in steel production, leading to better efficiency and quality. Smart investors might consider high-growth steel stocks like Mesabi Trust (MSB), Friedman Industries, Incorporated (FRD), and Stelco Holdings Inc. (STZHF).
Increased demand from infrastructure projects, the automotive sector, and global manufacturing drive the steel industry's bright prospects. Technological advancements in steel production and a strong focus on sustainability practices have improved consumer sentiment, benefiting the sector.
The World Steel Association's Short Range Outlook forecasts a 1.7% rebound in steel demand for 2024, reaching 1,793 Mt. For 2025, steel demand is expected to grow by 1.2%, reaching 1,815 Mt. This impressive growth of the steel industry is due to increased global demand and advancements in steel production technology.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Steel stocks mentioned above, starting with the third choice.
Stock #3: Mesabi Trust (MSB)
MSB is a royalty trust that engages in the iron ore mining business in the United States.
MSB’s Tang Book Value grew at a CAGR of 15.6% over the past three years.
In terms of the trailing-12-month levered FCF margin, MSB’s 57.65% is significantly higher than the 5.21% industry average. Likewise, its 100% trailing-12-month gross profit margin is 253.6% higher than the 28.28% industry average. Additionally, its 1.37x trailing-12-month asset turnover ratio is 101.4% higher than the industry average of 0.68x.
For the fiscal first quarter that ended March 31, 2024, MSB’s total revenues stood at $6.25 million, up 238.1% from the year-ago value. The company’s net income and net income per unit rose 240.5% and 240.4% year-over-year to $3.48 million and $0.27, respectively.
Over the past month, MSB’s stock has declined marginally to close the last trading session at $17.54.
MSB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #11 out of 30 stocks in the A-rated Steel industry. It has an A grade for Quality and a B for Growth. To see MSB’s Value, Momentum, Stability, and Sentiment ratings, click here.
Stock #2: Friedman Industries, Incorporated (FRD)
FRD engages in the manufacturing and processing of steel products in the United States. It operates in two segments: Flat-Roll Products and Tubular Products.
FRD’s revenue grew at a CAGR of 60% over the past three years. Also, its Total Assets grew at a CAGR of 34.3% over the past three years.
In terms of the trailing-12-month Return on Common Equity, FRD’s 14.14% is 138.5% higher than the 5.93% industry average. Its 9.56% trailing-12-month Return on Total Capital is 90.8% higher than the 5.01% industry average. Similarly, its 2.40x trailing-12-month asset turnover ratio is 253% higher than the 0.68x industry average.
FRD’s net sales increased 6.5% year-over-year to $132.23 million for the fiscal fourth quarter that ended March 31, 2024. The company’s net earnings came in at $4.96 million and $0.71 per share. In addition, FRD’s current assets as of March 31, 2024, amounted to $170.06 million, compared to $143.66 million as of March 31, 2023.
Over the past year, FRD’s stock has gained 14.4% to close the last trading session at $14.42.
FRD’s POWR Ratings reflect its positive outlook. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
In the same industry, FRD is ranked #2. It has an A grade for Value and a B for Growth, Sentiment, and Quality. Click here to see FRD’s Momentum and Stability ratings.
Stock #1: Stelco Holdings Inc. (STZHF)
Headquartered in Hamilton, Canada, STZHF engages in the production and sale of steel products internationally. It offers flat-rolled value-added steel, including coated, pre-painted, cold-rolled, and hot-rolled sheet products, as well as pig iron and metallurgical coke.
STZHF’s EBIT grew at a CAGR of 137.8% over the past three years. Also, its revenue grew at a CAGR of 19.7% over the past three years.
In terms of the trailing-12-month Return on Total Capital, STZHF’s 11.48% is 129.3% higher than the 5.01% industry average. Likewise, its 7.49% trailing-12-month net income margin is 56.7% higher than the industry average of 4.78%. Its 1x trailing-12-month asset turnover ratio is 47.5% higher than the industry average of 0.68x.
During the first quarter ended March 31, 2024, STZHF’s revenues increased 8.6% year-over-year to CAD746 million ($543.87 million). Its gross profit rose 572.2% over the prior-year quarter to CAD121 million ($88.21 million). Its net income attributable to the company rose 600% year-over-year to CAD70 million ($51.03 million). Also, its EPS came in at CAD1.27, representing an increase of 605.6% year-over-year.
For the quarter ending December 31, 2024, STZHF’s revenue is expected to increase 5.6% year-over-year to $479.16 million. Over the past nine months, the stock has gained 5.9% to close the last trading session at $26.38.
STZHF’s solid prospects are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Quality. Within the Steel industry, it is ranked first. Beyond the grades mentioned above, we have also rated STZHF for Momentum, Stability, and Sentiment. Get all ratings here.
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STZHF shares were trading at $26.38 per share on Wednesday afternoon, down $1.29 (-4.66%). Year-to-date, STZHF has declined -29.80%, versus a 16.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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