TSX:STLC

Stock Analysis Report

Executive Summary

Stelco Holdings Inc. produces and sells various steel products in Canada and the United States.

Rewards

Trading at 94% below its fair value

Earnings are forecast to grow 39.54% per year

Risk Analysis

High level of non-cash earnings

Has a high level of debt

Unstable dividend track record

Profit margins (7.4%) are lower than last year (85.9%)



Snowflake Analysis

Undervalued with reasonable growth potential.


Similar Companies

Share Price & News

How has Stelco Holdings's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: STLC has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

1.4%

STLC

2.4%

CA Metals and Mining

0.6%

CA Market


1 Year Return

-39.8%

STLC

4.4%

CA Metals and Mining

5.8%

CA Market

Return vs Industry: STLC underperformed the Canadian Metals and Mining industry which returned 4.3% over the past year.

Return vs Market: STLC underperformed the Canadian Market which returned 5.8% over the past year.


Shareholder returns

STLCIndustryMarket
7 Day1.4%2.4%0.6%
30 Day-8.3%1.2%0.5%
90 Day-7.6%6.6%3.6%
1 Year-34.0%-39.8%5.0%4.4%9.1%5.8%
3 Yearn/a-10.4%-11.9%15.4%5.0%
5 Yearn/a22.9%19.2%33.6%14.0%

Price Volatility Vs. Market

How volatile is Stelco Holdings's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Stelco Holdings undervalued compared to its fair value and its price relative to the market?

>50%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: STLC (CA$9.98) is trading below our estimate of fair value (CA$165.3)

Significantly Below Fair Value: STLC is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: STLC is good value based on its PE Ratio (5.8x) compared to the Metals and Mining industry average (15.6x).

PE vs Market: STLC is good value based on its PE Ratio (5.8x) compared to the Canadian market (15.9x).


Price to Earnings Growth Ratio

PEG Ratio: STLC is good value based on its PEG Ratio (0.1x)


Price to Book Ratio

PB vs Industry: STLC is overvalued based on its PB Ratio (1.8x) compared to the CA Metals and Mining industry average (1.5x).


Next Steps

Future Growth

How is Stelco Holdings forecast to perform in the next 1 to 3 years based on estimates from 7 analysts?

39.5%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: STLC's forecast earnings growth (39.5% per year) is above the savings rate (1.4%).

Earnings vs Market: STLC's earnings (39.5% per year) are forecast to grow faster than the Canadian market (10.4% per year).

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: STLC's revenue (2.7% per year) is forecast to grow slower than the Canadian market (4.9% per year).

High Growth Revenue: STLC's revenue (2.7% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: STLC's Return on Equity is forecast to be high in 3 years time (30.8%)


Next Steps

Past Performance

How has Stelco Holdings performed over the past 5 years?

8.3%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: STLC has a high level of non-cash earnings.

Growing Profit Margin: STLC's current net profit margins (7.4%) are lower than last year (85.9%).


Past Earnings Growth Analysis

Earnings Trend: STLC's earnings have grown by 8.3% per year over the past 5 years.

Accelerating Growth: STLC's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: STLC had negative earnings growth (-92.2%) over the past year, making it difficult to compare to the Metals and Mining industry average (11.9%).


Return on Equity

High ROE: STLC's Return on Equity (31.8%) is considered high.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Stelco Holdings's financial position?


Financial Position Analysis

Short Term Liabilities: STLC's short term assets (CA$1.0B) exceed its short term liabilities (CA$653.0M).

Long Term Liabilities: STLC's short term assets (CA$1.0B) exceed its long term liabilities (CA$527.0M).


Debt to Equity History and Analysis

Debt Level: STLC's debt to equity ratio (61%) is considered high.

Reducing Debt: Insufficient data to determine if STLC's debt to equity ratio has reduced over the past 5 years.

Debt Coverage: STLC's debt is well covered by operating cash flow (75%).

Interest Coverage: STLC's interest payments on its debt are well covered by EBIT (9.1x coverage).


Balance Sheet

Inventory Level: STLC has a high level of physical assets or inventory.

Debt Coverage by Assets: STLC's debt is covered by short term assets (assets are 3.4x debt).


Next Steps

Dividend

What is Stelco Holdings's current dividend yield, its reliability and sustainability?

4.01%

Current Dividend Yield


Dividend Yield vs Market

company4.0%marketbottom25%1.9%markettop25%5.3%industryaverage1.2%forecastin3Years4.0%

Current dividend yield vs market & industry

Notable Dividend: STLC's dividend (4.01%) is higher than the bottom 25% of dividend payers in the Canadian market (1.91%).

High Dividend: STLC's dividend (4.01%) is low compared to the top 25% of dividend payers in the Canadian market (5.32%).


Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, STLC has been paying a dividend for less than 10 years.

Growing Dividend: STLC has only been paying a dividend for 2 years, and since then payments have not increased.


Current Payout to Shareholders

Dividend Coverage: With its low payout ratio (23.1%), STLC's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: STLC's dividends in 3 years are forecast to be well covered by earnings (16.7% payout ratio).


Next Steps

Management

How experienced are the management team and are they aligned to shareholders interests?

2.4yrs

Average management tenure


CEO

David Cheney (43yo)

1yrs

Tenure

CA$2,182,720

Compensation

Mr. David Cheney is the Chief Executive Officer and Director at BI Acquisition Corp. since 8 July 2019. He has been Chief Executive Officer of Stelco Holdings Inc. (alternatively U. S. Steel Canada Inc. si ...


CEO Compensation Analysis

Compensation vs Market: David's total compensation ($USD1.65M) is about average for companies of similar size in the Canadian market ($USD1.55M).

Compensation vs Earnings: David's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.


Leadership Team

NamePositionTenureCompensationOwnership
David Cheney
Chief Executive Officer1yrsCA$2.18m0.0074% CA$65.4k
Sujit Sanyal
Chief Operating Officer2.4yrsCA$1.05mno data
Roy Collins
Interim Chief Financial Officer0.08yrsno datano data
Paul Simon
General Counsel & Corporate Secretary2.5yrsno data0.0033% CA$29.4k
William Aziz
Chief Restructuring Officer5.4yrsno datano data

2.4yrs

Average Tenure

63yo

Average Age

Experienced Management: STLC's management team is considered experienced (2.4 years average tenure).


Board Members

NamePositionTenureCompensationOwnership
Alan Kestenbaum
Executive Chairman2.4yrsCA$2.73m2.58% CA$22.8m
Alan Goldberg
Director1.9yrsno datano data
Michael Dees
Director2.4yrsno datano data
Michael Mueller
Independent Director0.7yrsno datano data
Indira Samarasekera
Independent Director1.8yrsno data0.0023% CA$20.7k
Jacob Lew
Director1.8yrsno datano data
Jeffrey Bunder
Director2.4yrsno datano data
Heather Ross
Independent Director0.7yrsno datano data

1.8yrs

Average Tenure

59.5yo

Average Age

Experienced Board: STLC's board of directors are not considered experienced ( 1.8 years average tenure), which suggests a new board.


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

Stelco Holdings Inc.'s company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Stelco Holdings Inc.
  • Ticker: STLC
  • Exchange: TSX
  • Founded: 1910
  • Industry: Steel
  • Sector: Materials
  • Market Cap: CA$885.359m
  • Shares outstanding: 88.71m
  • Website: https://www.stelco.com

Number of Employees


Location

  • Stelco Holdings Inc.
  • 386 Wilcox Street
  • Hamilton
  • Ontario
  • L8N 3T1
  • Canada

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
STLCTSX (The Toronto Stock Exchange)YesNew Common SharesCACADNov 2017
S0KDB (Deutsche Boerse AG)YesNew Common SharesDEEURNov 2017
STZH.FOTCPK (Pink Sheets LLC)YesNew Common SharesUSUSDNov 2017

Biography

Stelco Holdings Inc. produces and sells various steel products in Canada and the United States. It provides flat-rolled value-added steel, including coated, pre-painted, cold-rolled, and hot-rolled steel products, as well as metallurgical coke. The company sells its products to customers in the construction, automotive, and energy industries, as well as to various steel service centers. Stelco Holdings Inc. was founded in 1910 and is headquartered in Hamilton, Canada. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/02/17 00:50
End of Day Share Price2020/02/14 00:00
Earnings2019/09/30
Annual Earnings2018/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.