In this week’s video blog, I fundamentally analyze Nucor’s stock (NUE). I review Nucor’s key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and look at expected rate of return from this investment.
In the recent years, the US steel sector has been hurt due to over production of iron/steel in the international markets; Nucor is no exception. The recent international steel tariffs have helped Nucor recover some of its lost sales. As value investors, it is important to review the company’s fundamentals before deciding to invest in any company. Hope you all find this 13.5 minute video blog interesting. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), etc.
After taking into account the current free cash flow of $1,332 million figure, a 2% growth rate of FCF (growth for the next 10 years), 10% discount rate, 2% long term growth rate (growth from 10 year mark to perpetuity), 304 million shares outstanding, and $4,215 million of long term debt, the DCF analysis yields us an intrinsic value of $40 per share. Using the current stock price of about $45 per share, and taking into account the past 10 years of free cash flows and future projects of free cash flows, we get the expected rate of return of 8.8%.
Timestamp
0:00 Introduction
1:14 Key Ratios Analysis
9:03 Discounted Cash Flow Analysis / Intrinsic Value
10:22 Expected Rate of Return Calculation
11:25 Conclusion
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References:
Morningstar’s Nucor Key Ratios Link: here.
Useful Resources here.
Nucor Corporation is a producer of steel and related products headquartered in Charlotte, North Carolina. It is the largest steel producer in the United States, and is the largest “mini-mill” steelmaker and is the largest scrap recycler in North America.
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