Everyone is selling, the charts are red, but should you panic? Not at all. As a long term investor, my favorite time of the economic cycle is when great stocks sell at an unjustified discount. Today I want to bring to light the market’s darling – Public Joint Stock Company Magnitogorsk Iron & Steel Works. Looking at its size, financial health and track record, I believe there’s an opportunity with Magnitogorsk Iron & Steel Works during these volatile times.
Public Joint Stock Company Magnitogorsk Iron & Steel Works, together with its subsidiaries, produces and sells ferrous metal products in Russia and the CIS countries, the Middle East, Asia, Europe, and Africa. Magnitogorsk Iron & Steel Works was formed in 1932 and with the company’s market capitalisation at RUруб486b, we can put it in the mid-cap category. Size matters. The bigger the company is, the more well-resourced it is. The more money it produces from its operations which means it is less reliant on external funding. When times are bad in the market, being self-sufficient is extremely important as you can continue to operate at your own pace. Therefore, large cap companies are a great bet to invest in when you’re heading to the bottom of the cycle.
Magnitogorsk Iron & Steel Works currently has US$536m debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. With an interest coverage ratio of 141x, Magnitogorsk Iron & Steel Works produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Moreover, its cash flows from operations copiously covers it debt by over 2x, much higher than the safe minimum of 0.2x. And, a given, its liquidity ratio holds up well with cash and other liquid assets exceeding upcoming liabilities, meaning MAGN’s financial strength will continue to let it thrive in a fickle market.
MAGN’s profit growth over the previous five years has been positive, with an average annual rate of 67%, outpacing the industry growth rate of 17%. It has also returned an ROE of 26% recently, above the industry return of 9.3%. Characteristics I value in a long term investment are proven in Magnitogorsk Iron & Steel Works, and I can continue to sleep easy at night with the stock as part of my portfolio.
Next Steps:Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. Magnitogorsk Iron & Steel Works tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
- Future Outlook: What are well-informed industry analysts predicting for MAGN’s future growth? Take a look at our free research report of analyst consensus for MAGN’s outlook.
- Valuation: What is MAGN worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MAGN is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.