Steel Dynamics: Long, Even With Relaxed Steel Prices
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Update time : 2022-10-11 17:08:30
Steel Dynamics, Inc. was a successful company even before inflated steel prices. As steel prices relax, and revenue and margin numbers slow down, STLD still exhibits many indicators of a "Buy" at the current price for investors holding for ten years.
Steel Dynamics, Inc. (NASDAQ:STLD) is a large steel producer and metal recycler. Their revenue streams comprise of manufacturing steel products, processing of recycled metals, and fabrication of steel joists and deck products. From an industry standpoint, we are seeing a cooldown in steel prices, with futures dropping around 40% (YTD) and current prices remaining stable into 2023. This will drastically reduce revenue and margins of STLD in the upcoming years. From a growth perspective, we can expect around a 3.3% CAGR to 2025. Overall, STLD is in a slow-growth, but essential, industry.
STLD had amazing revenue growth in 2021 due to inflated prices of steel, and thus should not be taken into the norm. Prior to 2021, they still showed overall revenue growth, on average 3% a year from 2012 to 2020. Growth on free cash flow was on average 26% YoY and Net income 30% YoY from 2012 to 2020. STLD was a money-making machine without the help from inflated prices.
