Assessing Reliance Steel & Aluminum (RS) Valuation Following JP Morgan’s Positive Analyst Coverage Launch

Reliance (NYSE:RS) just caught the spotlight after JP Morgan launched coverage on the stock with an "Overweight" rating. Moves like this from a major brokerage can grab the attention of both long-term investors and those scanning for momentum opportunities. The fact that JP Morgan is starting its research with a positive stance adds significance, potentially bringing new eyes and a burst of trading activity to the name.

This latest development comes as Reliance’s shares have delivered steady returns over the past year, with a 6% total gain. While the past month has seen a modest pullback, the long-term story shows substantial price appreciation. The stock has climbed significantly over the past five years. Recent months have also seen Reliance added to several broker “top pick” lists, which may have contributed to changing perceptions around its growth and risk profile.

With major analysts increasing their coverage and momentum shifting, investors may be considering whether Reliance offers a window to buy into future growth at a reasonable value, or if the market is already factoring in this story.

Most Popular Narrative: 11.7% Undervalued

The prevailing view is that Reliance is trading below its fair value. The narrative suggests considerable upside potential based on future growth, margin expansion, and return of capital to shareholders.

Consistently high cash flow generation and ongoing share repurchases are reducing share count and supporting shareholder returns. Together with strong organic growth, these factors can drive higher earnings per share (EPS) even if top-line growth is moderate.

Want to know what’s fueling this bullish target? The narrative hinges on a set of bold financial assumptions and future benchmarks few would expect for this industry. Wondering which surprising growth levers, margin improvements, and capital actions analysts are betting on? The full story is packed with the key forecasts that put Reliance’s fair value well above today’s price.

Result: Fair Value of $329.13 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, trade policy uncertainty and ongoing inflation could pressure Reliance's margins. This may potentially challenge the optimistic growth narrative analysts have outlined.

Find out about the key risks to this Reliance narrative.

Another View: Our DCF Model Offers a Different Perspective

Looking from another angle, our SWS DCF model reaches a different conclusion. This approach weighs Reliance’s future cash flows and suggests the shares may not be as cheap as the market thinks. Which method truly reflects reality?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Reliance for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Reliance Narrative

If you have a different take or want to dive deeper into the numbers yourself, you can shape your own narrative in just a few minutes. Do it your way

A great starting point for your Reliance research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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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