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As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of United States Steel Corporation (NYSE:X), it is a financially-sound company with a a great track record of performance, trading at a discount. Below, I’ve touched on some key aspects you should know on a high level. For those interested in digger a bit deeper into my commentary, read the full report on United States Steel here.
Outstanding track record, undervalued and pays a dividend
Over the past year, X has grown its earnings by 97%, with its most recent figure exceeding its annual average over the past five years. The strong earnings growth is reflected in impressive double-digit 27% return to shareholders, which is an notable feat for the company. X’s strong financial health means that all of its upcoming liability payments are able to be met by its current cash and short-term investment holdings. This suggests prudent control over cash and cost by management, which is a key determinant of the company’s health. X’s has produced operating cash levels of 0.45x total debt over the past year, which implies that X’s management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.
X’s shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. Investors have the opportunity to buy into the stock to reap capital gains, if X’s projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the metals and mining industry, X is also trading below its peers, relative to earnings generated. This bolsters the proposition that X’s price is currently discounted.
Next Steps:
For United States Steel, there are three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for X’s future growth? Take a look at our free research report of analyst consensus for X’s outlook.
- Dividend Income vs Capital Gains: Does X return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from X as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of X? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
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 editorial-team@simplywallst.com. 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.