Worthington Steel (WS): Evaluating Valuation After Earnings Beat, Strong Automotive Growth, and New EV Expansion

Worthington Steel (WS) just caught the market’s attention with first-quarter earnings and revenue that surpassed expectations, fueled by a surge in automotive shipments and a timely acquisition aimed at boosting its electric vehicle footprint. The company reported higher sales volumes, and leveraging artificial intelligence also contributed to improved operational efficiency. Management’s decision to expand into new growth areas, paired with sustained profitability, seems to suggest a business not content to stand still.

This news comes amidst a year where Worthington Steel’s stock has experienced significant ups and downs. Despite the positive earnings momentum and recent dividend affirmation, the share price remains down about 7% from a year ago, with shorter-term moves signaling ongoing uncertainty rather than a clear trend. While recent investor enthusiasm increased after the earnings announcement, the broader backdrop for the steel sector and the company’s own long-term trajectory remain works in progress.

After a solid earnings beat and a refreshing update on the company’s ambitions, the question remains: Is Worthington Steel’s current price an undervaluation of what’s next, or is the market simply factoring in future growth already?

Most Popular Narrative: 16% Undervalued

According to the most widely followed narrative, Worthington Steel’s current share price trades at a meaningful discount to its fair value, with analysts projecting notable upside from today’s levels.

Worthington Steel is poised to benefit from increased demand in the electrical steel market due to AI initiatives, more data centers, and an anticipated annual power demand growth of more than 6% over the next 15 years. This is expected to lead to higher revenues.

Curious about the formula powering this bullish price target? The consensus view relies on a specific mix of projected revenue growth, expanding profit margins, and a surprisingly aggressive earnings forecast. Do you think you can guess the boldest assumption fueling this fair value estimate? The numbers behind the calculation might challenge your expectations about this steel giant’s future trajectory.

Result: Fair Value of $36 (UNDERVALUED)

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

However, soft demand in key sectors and price volatility could quickly challenge the optimistic case for Worthington Steel in the months ahead.

Find out about the key risks to this Worthington Steel narrative.

Another View: SWS DCF Model Offers a Check

While analyst price targets suggest upside, our DCF model takes a different angle on Worthington Steel. This model focuses on its future cash flows rather than earnings multiples. This approach still points to the stock being undervalued. Could these different models be telling the same story, or missing something below the surface?

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 Worthington Steel 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 Worthington Steel Narrative

If you have a different take or enjoy digging into details firsthand, you can shape your own perspective in just a few minutes. Do it your way.

A great starting point for your Worthington Steel research is our analysis highlighting 3 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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