18% Upside on This Steel Stock: Nucor Corporation (NUE)

United States Steel Corporation (NYSE: X) just reported a net loss of $50 million in its latest quarter. It is trading at a forward P/E (1yr) of 10.04x and has a PEG of 2.43. Moreover, its high PEGY of 2.20 shows that it is highly overvalued at this moment. Having said this, it has one of the lowest levels of growth in the steel industry. Further, a meager yield of 0.90% on its dividend and a mean recommendation of 2.9 on the sell side show its weak position. In short, I remain neutral on U.S Steel Corporation. You can have a look at my detailed take on U.S. Steel here.

Conclusion

The U.S. Steel industry has suffered a major hit from the economic downturn in the last few years. Moreover, high volumes of imports haven’t helped the cause either. Even under such tough economic conditions, Nucor’s international shipments were 10.4% of the total shipments in 2012. Nucor Corporation has not only minted some huge profits in the last few years, but it has also paid large sums of cash dividends to its shareholders. In December, 2012, the company increased its dividends for the 40th consecutive time. Moreover, over the last 12 years, its dividend has grown almost 10 times. Even in the economic downturn, the company showed a lot of resilience. Its strong cash flows are a testimony to its high liquidity, which in turn means that the company would continue to reward its shareholders with healthy dividends in the future as well. The bottom line is that Nucor has been the source of inspiration for the steel industry during the economic headwinds. As the U.S. economy gradually moves towards stability, Nucor is expected to perform even better in the years ahead. In short, buy Nucor for an upside of 18%.

The article 18% Upside on This Steel Stock originally appeared on Fool.com and is written by Waqar Saif.