Reliance Steel
provides value-added metals processing services and distributes more than
100,000 metal products. The company has
grown profits and dividends at a 17-18% rate and earned a 7-19% return on
equity over the last ten years. RS
operations are subject to macroeconomic forces; however, it should grow at an
above average pace over a business cycle as a result of:
(1) despite slow
economic growth, it is witnessing improvement in its core customer base
(aerospace and energy) resulting in both rising demand and prices,
(2) acquisitions
(latest: Metals USA),
(3) an excellent
cost control discipline.
Negatives:
(1) the
lackluster nonresidential construction market is impacting sales of carbon
steel,
(2) rising raw
material costs,
(3) industry
overcapacity.
RS is rated B++
by Value Line, has a debt/equity ratio of approximately 35% and its stock
yields 2.0%
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2004
RS 2.0% 16 22% 7
Ind Ave 2.3 7 36 NA
Debt/ EPS Down Net Value Line
Equity ROE
Since 2004 Margin Rating
RS 35% 11% 2 5% B++
Ind Ave 37 7 NA 4 NA
Chart
Note:
RS stock made great progress off its March 2009 low, quickly surpassing the downtrend
off its June 2008 high (straight red line) and the November 2008 trading high
(green line). Long term, it is in an
uptrend (blue lines). Earlier this year,
it broke its intermediate term uptrend and re-set to a trading range (purple
lines). The wiggly red line is the 50
day moving average. The Aggressive
Growth Portfolio owns a full position in RS.
The upper boundary of its Buy Value Range is $33; the lower boundary of
its Sell Half Range is $95.
8/14
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