US Manufacturing Reshoring And Automation Will Unlock Future Value

Key Takeaways

• Expansion in value-added fabrication, automation, and strategic acquisitions is strengthening margins, scale, and pricing power in a consolidating industry.
  
• Manufacturing reshoring, federal stimulus, and infrastructure spending are fueling long-term demand, supporting sustained revenue growth and earnings stability.
  
• Reliance on buy-ahead demand, challenging market conditions, rising costs, and fewer attractive growth opportunities pose risks to long-term revenue growth and profitability.

Catalysts

Processes, distributes, and stores metal products primarily in the United States, Canada, and Mexico.

• Olympic Steel is positioned to benefit from increased U.S. manufacturing reshoring and onshoring, with rising inquiries from OEMs seeking outsourced fabrication-this is likely to drive higher volumes and improved pricing power, positively impacting future revenue and net margins.
  
• Substantial capital investments in new automation and processing equipment (including high-speed lasers and cut-to-length lines) are slated to come online by year-end 2025 and early 2026, supporting higher operational efficiency and shifting the product mix toward more value-added, higher-margin offerings, which should enhance EBITDA margins and earnings stability.
  
• Expansion into fabrication and value-added processing is leading to margin improvement (evidenced by resilient segment margins even as industry shipping volumes fall), with expected growth in data center and OEM work likely supporting sustained net margins and topline growth.
  
• Ongoing strategic acquisitions-facilitated by a strong balance sheet and ample liquidity-are expanding geographic reach and product capabilities, increasing scale and providing additional avenues for revenue growth and improved pricing leverage in a consolidating industry.
  
• The multi-year trend of increased federal stimulus and infrastructure investment is supporting underlying long-term demand for steel, meaning Olympic Steel stands to benefit from secular tailwinds that could underpin sustained revenue growth and margin expansion as project backlogs increase.

Olympic Steel Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Olympic Steel's revenue will grow by 3.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.8% today to 2.3% in 3 years time.
• Analysts expect earnings to reach $46.5 million (and earnings per share of $3.93) by about August 2028, up from $14.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.6x on those 2028 earnings, down from 23.9x today. This future PE is lower than the current PE for the US Metals and Mining industry at 21.5x.
• Analysts expect the number of shares outstanding to grow by 0.58% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.95%, as per the Simply Wall St company report.

Olympic Steel Future Earnings Per Share Growth

Risks

• Olympic Steel's revenue and shipment volumes benefited in the first half of 2025 from temporary "buy-ahead" customer behavior driven by tariff-related uncertainty, suggesting future organic demand may soften, leading to lower revenues once this pull-forward effect reverses.
  
• Steel and aluminum industry volumes declined in 2025 versus 2024, and current end market conditions are described as "challenging" due to macro uncertainty and volatile tariff policy, raising ongoing risks to long-term revenue growth and net margins if these secular headwinds persist.
  
• Increasing operating expenses (rising to $110.4 million in Q2 2025 from $104.6 million in Q2 2024) and high fixed costs, especially amid periods of shrinking or flat industry volumes, point to the risk that high operating leverage could compress net margins and earnings during future downturns.
  
• Olympic Steel's growth continues to rely heavily on M&A and organic CapEx; however, the company noted that attractive acquisition opportunities have become less plentiful and that new organic investments may face diminishing returns, adding risk to long-term revenue expansion and efficient capital deployment.
  
• The steel industry remains exposed to policy and demand shocks tied to tariffs, potential reduction of Section 232 tariffs, and substitution risk from alternative materials such as composites and aluminum, which could gradually reduce demand for steel and constrain Olympic Steel's topline growth and long-term profitability.

Valuation

• The analysts have a consensus price target of $38.0 for Olympic Steel based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $46.5 million, and it would be trading on a PE ratio of 11.6x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of $30.71, the analyst price target of $38.0 is 19.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.