The steel industry is part of the basic materials sector and consists of companies involved in steel production, mining, and related activities. Although steel historically has been a major U.S. industry, the number of steel mills that produce the metal has declined sharply in the past several decades due to foreign competition. Some of the big names in the global steel industry include Rio Tinto PLC (RIO), Vale S.A. (VALE), and Reliance Steel & Aluminum Co. (RS). Steel stocks, as represented by the VanEck Vectors Steel ETF (SLX), have significantly underperformed the broader market with a total return of -11.0% compared to the Russell 1000's total return of 13.8% over the past 12 months as of September 11. All other figures are as of September 14, 2020.
Here are the top 3 steel stocks with best value, growth or least profit decline, and momentum.
Best Value Steel Stocks
These are the steel stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
|Best Value Steel Stocks|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E Ratio|
|Commercial Metals Co. (CMC)||20.09||2.4||8.1|
|Labrador Iron Ore Royalty Corp. (LIF.TO)||CA$26.89||CA$1.7||8.6|
|Steel Dynamics Inc. (STLD)||29.33||6.2||11.8|
- Commercial Metals Co.: Commercial Metals manufactures and recycles steel and metal products, and sells related materials and services. Some of its products include scrap metal, reinforcing bars, merchant bars, light structural products, fabricated meshes, and more. In August, the company announced plans to build its third micro mill that will be the first in the world to produce merchant bar quality products through a "continuous-continuous" production process. Located in Arizona, the mill is expected to generate $50 million in incremental EBITDA.
- Labrador Iron Ore Royalty Corp.: Canadian open-ended trust Labrador Iron Ore Royalty holds an overriding royalty on all products related to the Iron Ore Company of Canada. Iron Ore Company of Canada produces iron ore for global customers. It also sells copper, aluminum, titanium and other metals.
- Steel Dynamics Inc.: Steel Dynamics, a carbon steel producer and metals recycler, offers products including flat rolled steel sheets and structural beams. On August 21, the company announced a quarterly cash dividend of $0.25 per common share, payable on October 16 to shareholders.
Steel Stocks With the Most Profit Growth or Least Profit Decline
These are the steel stocks with the highest year-over-year (YOY) earnings per share (EPS) growth or lowest EPS decline for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders. Only two companies in our screen saw earnings growth over this time period. The third on the list reported the smallest decline in earnings compared to other steelmakers.
|Steel Stocks With the Most Profit Growth or Least Profit Decline|
|Price ($)||Market Cap ($B)||EPS Growth (%)|
|Mechel PAO (MTL)||1.57||0.4||2,590|
|Kumba Iron Ore Ltd. (KIROY)||11.15||10.7||28.53|
|Commercial Metals Co. (CMC)||20.09||2.4||-18.2|
- Mechel PAO: Mechel is involved in multiple metals businesses, including steel production, mining, and ferroalloys. Besides its steel business, the Russian company is a producer of coal, iron ore concentrate, and other products. It provides its products to customers around the world.
- Kumba Iron Ore Ltd.: Kumba Iron Ore is a South African company involved in the mining and production of iron ore. For the first half of 2020, Kumba reported a 55% EBITDA margin. The company said that its production and sales levels were in line with the its adjusted guidance based on business disruptions in 2020 due to COVID-19 and that its run-rates returned to normal levels in June.
- Commercial Metals Co.: See company description above.
Steel Stocks with the Most Momentum
These are the steel stocks that had the highest total return over the last 12 months. Despite massive declines by most steel stocks, the top three momentum steel stocks below all posted positive returns.
|Steel Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Kumba Iron Ore Ltd. (KIROY)||11.15||10.7||40.0|
|Labrador Iron Ore Royalty Corp. (LIF.TO)||CA$26.89||CA$1.7||17.3|
|Gerdau SA (GGB)||3.73||6.3||16.7|
|VanEck Vectors Steel ETF (SLX)||N/A||N/A||-11.0|
- Kumba Iron Ore Ltd.: See company description above.
- Labrador Iron Ore Royalty Corp.: See company description above.
- Gerdau SA: Gerdau is a Brazil-headquartered steel manufacturer with operations in the Americas, Europe, and Asia. The company follows the practice of mini mill steel production by which it turns scraps into steel.
YCharts. "YCharts." Accessed Sept. 14, 2020.
Commercial Metals Co. "Commercial Metals Company Announces Plans To Build Its Third Micro Mill," Page 1. Accessed Sept. 14, 2020.
Steel Dynamics Inc. "Steel Dynamics Announces Third Quarter 2020 Cash Dividend." Accessed Sept. 14, 2020.
Kumba Iron Ore Ltd. "Interim Report for the six months ended 30 June 2020." Accessed Sept. 14, 2020.