ArcelorMittal (ADR) (MT), Nucor Corporation (NUE): The Best Way to Play a US-Led Steel Recovery

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Nucor Corporation (NYSE:NUE): The safest company

Nucor Corporation (NYSE:NUE) is the largest US steel manufacturer by production, and its mills are among the most modern and efficient in the world. Being the profitability champion within the steel sector, Nucor Corporation (NYSE:NUE) is investing for future growth. The company has invested $800 million of its 2013 capital-expenditure target without incurring the dangerous leverage that characterizes the steel industry. With a net- debt-to-EBITDA ratio at x1.7, the company has a very strong balance sheet.

Even if Nucor Corporation (NYSE:NUE) trades at a premium to its peers, the premium is more than justified. The company is the safest bet within an industry that has been operating under pressure for many years. As a matter of fact, it is the only company within this group of three that has been consistently making money since the 2009 crisis. Nucor Corporation (NYSE:NUE) is trading at x10.3 EV/EBITDA for 2013 and a P/E ratio of x24, which is well above its peer group.

Final comment

Although the steel market is experiencing some difficulties, I think that there is a good opportunity for the future. The companies analyzed above have different types of risks and rewards. For those looking for global exposure to steel prices, ArcelorMittal (ADR) (NYSE:MT) might be a good option. For those looking for a safe and US-focused stock, Nucor Corporation (NYSE:NUE) is the answer. Meanwhile, for investors looking for a healthy balance sheet at a premium price, they should go for US Steel.

The article The Best Way to Play a US-Led Steel Recovery originally appeared on Fool.com.

Vanina Egea has no position in any stocks mentioned. The Motley Fool recommends Nucor. The Motley Fool owns shares of ArcelorMittal. Vanina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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