Stock Analysis

Should You Be Adding Ryerson Holding (NYSE:RYI) To Your Watchlist Today?

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NYSE:RYI
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Ryerson Holding (NYSE:RYI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Ryerson Holding

Ryerson Holding's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that Ryerson Holding grew its EPS from US$2.14 to US$13.93, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Ryerson Holding is growing revenues, and EBIT margins improved by 9.5 percentage points to 13%, over the last year. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NYSE:RYI Earnings and Revenue History October 1st 2022

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Ryerson Holding's balance sheet strength, before getting too excited.

Are Ryerson Holding Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Ryerson Holding insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at US$31m. This considerable investment should help drive long-term value in the business. Even though that's only about 3.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Ryerson Holding Worth Keeping An Eye On?

Ryerson Holding's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Ryerson Holding for a spot on your watchlist. However, before you get too excited we've discovered 4 warning signs for Ryerson Holding (1 is significant!) that you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

What are the risks and opportunities for Ryerson Holding?

Ryerson Holding Corporation, together with its subsidiaries, processes and distributes industrial metals in the United States, Canada, Mexico, and China.

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Rewards

  • Trading at 7.7% below our estimate of its fair value

  • Earnings grew by 204.6% over the past year

Risks

  • Has a high level of debt

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