AK Steel Holding Corporation (AKS), Nucor Corporation (NUE): This Steel Stock Is Not Out of the Woods Yet

Nucor Corporation (NYSE:NUE) is trading at a forward P/E of 13, but earnings estimates tend to shrink as the rebound in steel prices is postponed. U.S. Steel is trading at 0.78 P/B, while Nucor is trading at 1.94 P/B. The fact that Nucor is profitable causes the stock to trade at a significant premium to its peers. So far, the current price level is what worries investors in steel stocks the most.

Bottom line

The question of putting your money in AK Steel Holding Corporation (NYSE:AKS), or Nucor Corporation (NYSE:NUE), or United States Steel Corporation (NYSE:X) is about whether you believe that steel prices would rise. There is overcapacity in the market. There is a slowdown in China and continued weakness in Europe. On the other hand, this is not eternal, and at some point, the prices would appreciate.

AK Steel greatly depends upon the price of steel. While Nucor Corporation (NYSE:NUE) is still profitable at current levels, AK Steel is not. There is no driver to push the steel prices up in the near term, so my bet is that AK Steel would continue to fluctuate back and forth. This is also true for United States Steel Corporation (NYSE:X). As for Nucor, the company needs better prices, too, to show positive movements.

The article This Steel Stock Is Not Out of the Woods Yet originally appeared on Fool.com.

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