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Top Steel Stocks for Q4 2022

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 U.K.-based Rio Tinto PLC (RIO), Brazil-based Vale SA (VALE), and Reliance Steel & Aluminum Co. (RS).

The industry is rebounding after a challenging 2020 due to the pandemic. Steel stocks, as represented by the VanEck Vectors Steel ETF (SLX), significantly outperformed the broader market in the past year. SLX’s total return is 103.2%, more than triple the S&P 500’s total return of 31.2%. These figures and all statistics in the tables below are as of Aug. 31, 2021.

Here are the top 3 steel stocks with the best value, the fastest growth, and the most momentum.

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.

Source: YCharts

  • Mechel PAO: Mechel PAO is a Russia-based mining, steel, and power company. The company produces semi-finished steel, coke, iron ore, chemical products, and electricity. On Aug. 30, the company announced that Andrey Pasynich was appointed chief executive officer (CEO) of Mechel Mining Management Company OOO. Pasynich replaces Igor Khafizov, who left the company.
  • Companhia Siderurgica Nacional: Companhia Siderurgica Nacional is a Brazil-based steel manufacturer. It mines iron ore and produces semi-finished steel products for multiple industries. For Q2 2021, the company reported that adjusted EBITDA more than quadrupled year-over-year (YOY) on soaring net revenue. These results are attributable to the improved prices and cost efficiency across the company.
  • Ternium SA: Ternium is a Luxembourg-based company that manufactures and processes steel products used in a broad range of industries including automotive, home appliances, energy, capital goods, and construction.

These are the top steel stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Source: YCharts

  • Cleveland-Cliffs Inc.: Cleveland-Cliffs is a major North American flat-rolled steel producer and major supplier of iron ore pellets. The company is not included in the EPS growth column above because it went from negative EPS in Q2 2020 to positive EPS in Q2 2021, meaning that a YOY growth figure is not applicable. In late August, Cleveland-Cliffs announced multiple executive management changes. They include: Clifford T. Smith, formerly chief operating officer (COO), was promoted to president of Cleveland-Cliffs Steel; and Celso L. Goncalves, formerly senior vice president, finance & treasurer, was promoted to chief financial officer (CFO). The appointments became effective Sept. 1, 2021.
  • Ternium SA: See company description above.
  • Companhia Siderurgica Nacional: See company description above.

These are the steel stocks that had the highest total return over the last 12 months.

Source: YCharts

  • Stelco Holdings Inc.: Stelco Holdings is a Canada-based company that produces hot rolled, cold rolled, and coated sheet steel products. These products are used in the construction, automotive, and energy industries.
  • TimkenSteel Corp.: TimkenSteel manufactures and sells steel and mechanical components including steel bars, bearings, seals, tubes, and chains. The company’s clients include members of the oil and gas, industrial, mining, construction, and power generation industries. Driven by rising prices and strong demand, TimkenSteel reported net income of $54.0 million in Q2 2021 after a net loss one year prior. Net sales more than doubled YOY.
  • Cleveland-Cliffs Inc.: See above for company description.

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.