Nucor, Inc.
Fundamental analys of Nucor (ticker: NUE), July 15, 2017
Description:
Nucor is an American steel producer that sells steel and steel products in the United States and internationally. Their headquarters are in Charlotte, North Carolina.
Valuation:
At $60 and 24 times trailing earnings, Nucor is expensive. When looking at an average of the past three years’ earnings the P/E ratio comes in at 37 which is a lot of money.
The Price to book value is also high at 3.6.
Balance sheet:
The Balance sheet of course looks good. In the end, this is what the market is paying for. Their Debt to equity ratio is 0.8 which is considered low risk and their Working capital is $4.1 billion which at least means that they can pay their short-term bills.
Free cash flow and dividend:
Last year Nucor had a Free cash flow of $1.1 billion which equates to $3.50 a share. Of this they are paying a dividend of $1.49 which means that the current yield is 2.5%.
Nucor is part of The Dividend Aristocrats which means that they have been paying out uninterrupted and increasing dividends for more than 25 years.
Conclusion:
If the share had been 30 per cent cheaper I would have been a buyer. Now it is too expensive for my taste.
Update, August 14, 2017
Nucor is valued at 22.2 times its earnings in 2016. This is in my opinion too pricey.
If we then estimate the earnings for this year to $3.50 the P/E multiple comes in at 15.8 which is still too high, but slightly better.
Balance sheet, earnings and dividend history are all outstanding.
In summary I would not buy Nucor at these prices.
Update, December 13, 2017
The company has even gotten more overvalued since last time we looked at it. It is now valued at 25 times 2016’s earnings. If, on the other hand, look at the projected earnings for the year they come in at about $3.90 which gives a forward P/E ratio of 16 which is not altogether bad – although still expensive.
Nucor’s fundamentals are solid: Their Debt to equity ratio is 0.8 which is associated with relatively low risk. They have a Free cash flow yield of almost 6 per cent which is better that most of its peers. The net earnings to sales is 5 per cent which is a good number for a manufacturing company.
In summary, there’s nothing wrong with the company, but the market is willing to pay too much for it right now.