Should Investors Revisit Steel Dynamics After a 44% 2025 Surge?

If you have owned Steel Dynamics for a while, you already know what an impressive ride it’s been. And if you are wondering whether now is the time to dive in or maybe even take some profits, you are definitely not alone. With the stock closing recently at $161.07, Steel Dynamics has delivered an eye-popping 441.8% return over the past five years. Even just this year, the stock has surged 43.9%, drawing the attention of investors who seek not just momentum, but reasons behind the move.

So, what is fueling this remarkable stretch? Lately, much of the optimism centers around ongoing infrastructure spending and the industry’s push for more sustainable steel production. While some news headlines have added a jolt of enthusiasm, the underlying theme has been the market’s improving outlook on US-based steelmakers. That change in sentiment is showing up in the numbers, too: shares are up 15.4% in just the last month and 4.7% in the past week alone.

But with all this action, is Steel Dynamics still undervalued or is the market finally catching up to its potential? Based on our deep-dive into six key valuation checks, the company earns a value score of 5 out of 6. In other words, five different measures flash undervalued, which is not something you see every day. Let’s break down what those valuation approaches tell us and stay tuned, because at the end, we will get to an even more insightful way to understand Steel Dynamics’ true worth.

Why Steel Dynamics is lagging behind its peers

Approach 1: Steel Dynamics Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s value. For Steel Dynamics, this approach involves examining both the company’s recent Free Cash Flow (FCF) and expected growth in the years ahead.

Currently, Steel Dynamics reports a Last Twelve Months’ Free Cash Flow of $37.25 Million. Analysts predict meaningful growth, with FCF expected to reach $2.20 Billion by the end of 2027. Over the next decade, projection models suggest that annual FCF could steadily increase, with analyst consensus guiding the early years and further estimates extrapolated out to 2035 by Simply Wall St. These projections form the basis for the two-stage Free Cash Flow to Equity model used here, all denominated in US dollars.

Based on these forecasts, the DCF calculation results in an intrinsic value of $308.19 per share for Steel Dynamics. With a recent closing price of $161.07, this means the stock is trading at a 47.7% discount to its estimated fair value. This suggests considerable potential upside and undervaluation based on current projections.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Steel Dynamics.

Our Discounted Cash Flow (DCF) analysis suggests Steel Dynamics is undervalued by 47.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Steel Dynamics Price vs Earnings

The price-to-earnings (PE) ratio is a reliable metric for valuing profitable companies like Steel Dynamics, because it directly relates the company’s current share price to its underlying earnings power. Investors often use the PE ratio to assess whether a stock is trading at a reasonable price given its recent and expected profitability.

Interpreting what counts as a fair or normal PE ratio depends on several factors. Companies with higher growth expectations or lower risk profiles typically justify higher PE ratios, since investors are willing to pay more for future earning potential. By contrast, slower growth or perceived risks often warrant lower multiples.

Steel Dynamics currently trades at a PE ratio of 20.87x. This is below both the Metals and Mining industry average of 25.69x and the average of its peers at 33.29x. However, static comparisons like these can be misleading, since they fail to account for the unique blend of growth, profitability, and risk factors that affect each company.

This is where the Simply Wall St "Fair Ratio" comes in. It is a proprietary metric designed to estimate the most fitting PE multiple for Steel Dynamics, factoring in its earnings growth, profit margins, industry, market capitalization, and risk profile. Unlike simple peer or industry averages, the Fair Ratio offers a more personalized view of what the company should be worth based on its fundamentals.

Steel Dynamics has a Fair Ratio of 33.92x, which is substantially higher than its current 20.87x. This suggests the stock is trading at a notable discount to its calculated fair multiple, pointing to undervaluation based on earnings potential.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Steel Dynamics Narrative

Earlier, we touched on the idea that there is an even better way to understand valuation. This is where Narratives come in. A Narrative is simply your investment story: it connects your unique perspective on Steel Dynamics, your estimates for its future revenue, earnings, and profit margins, and the fair value those numbers imply. Narratives help you move beyond the numbers by tying together what you believe about the company’s future with concrete financial forecasts and a realistic assessment of what the stock might be worth.

On Simply Wall St’s Community page, you can explore and build Narratives for Steel Dynamics using an intuitive tool adopted by millions of investors. Narratives are easy to update as new earnings, news, or business changes come in, keeping your view relevant in real time. By comparing each Narrative’s fair value to the current share price, you can see when your story suggests it’s time to buy, hold, or sell. For example, some investors foresee strong demand from infrastructure and sustainable metals, estimating a fair value above $153 per share, while others expect cyclical headwinds and forecast values closer to $130, demonstrating how personal perspective shapes opportunity.

Do you think there's more to the story for Steel Dynamics? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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