At the current price of $15, what is the market’s view of Schnitzer Steel Industries’ future operating performance? To achieve average annual stock market performance of 9.0% over the next 6 years, Schnitzer Steel Industries shares will need to reach $25. Upper quartile performance will require a $30 Schnitzer Steel Industries stock price by 2029.
Executive Summary
- Key Schnitzer Steel Industries characteristics: above average expected growth, below average financial strength, low stability, and very low profitability.
- Very low valuation, lagging shareholder returns. Current valuation levels are very low relative to the Schnitzer Steel Industries Peer Group. Recent market returns have substantially underperformed the Schnitzer Steel Industries Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Schnitzer Steel Industries shares should reach a level of $47 by 2029 — an 24.7% per year total shareholder return. A 2029 stock price of $25 would reflect median performance and a price of $30 would be required to reach upper quartile performance.
- Schnitzer Steel Industries’ historical growth is modestly above average. Historical growth has been high relative to the Schnitzer Steel Industries Peer Group and forecasted growth is relatively high. Asset Growth, and Revenue Growth have been superior. These factors have buoyed market perceptions of Schnitzer Steel Industries. Schnitzer Steel Industries’ historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity.
- Pretax Margin, Pretax ROA, and Return on Equity are group lagging. These factors have negatively affected market perceptions of Schnitzer Steel Industries. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Schnitzer Steel Industries’ risk profile is favorable. Overall variability has been very high with very high revenue variability, very high E.P.S. variability, and very high stock price volatility. Financial Strength is only average and earnings’ expectations are very low. The debt/capital ratio has risen very significantly.
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