Value
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.0 |
| P/S | 9.2 |
| EV/EBITDA | 4.6 |
| Fwd P/E | 9.0 |
| PEG | 10.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 11.7x
- ▸PEG: 0.13
- ▸Attractively valued
STLD · Why this verdict
Why Steel Dynamics (STLD) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score6.7/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Steel Dynamics earns best-in-class peer rankings for return on equity and margins, generates strong year-over-year earnings growth of 46%, and has received recent positive analyst mentions, but has already surpassed its analyst consensus price target, carries a negative free cash flow flag, and posted mixed earnings results over the past 4 quarters.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The stock is trading well above analyst consensus price targets with approximately negative 14% indicated upside and a reward-to-risk ratio of 0.57 at the current price of $272.19. Targets | Analyst consensus price target is upgraded to above $300, more than 10% above current price, following positive earnings revisions driven by the strong growth trajectory over the next 12 months. | →Stable |
| CounterSteel stocks are volatile cyclicals, and without sustained earnings beats the analyst target gap may close via price decline rather than target upgrade, producing negative returns from current levels. | ||
Steel Dynamics ranks at the top of its peer group for return on equity and operating margins according to peer comparison data, indicating a structural competitive advantage over the typical steel manufacturer. Peer-rank breakdown | Return on equity remains among the top quartile of the steel peer group for at least 3 of the next 4 reported quarters, confirming the margin and efficiency advantage is durable. | ↓Deteriorating |
| CounterSteel industry margins are highly cyclical and tied to steel spread (selling price minus raw material cost); a demand slowdown or scrap cost spike could compress margins toward peer average levels within one or two quarters. | ||
Steel Dynamics is generating 46% year-over-year revenue growth alongside strong earnings growth, positioning the company as a cyclical earnings expansion story during current steel market conditions. Bull case | Revenue growth remains above 10% year-over-year for at least 2 of the next 4 reported quarters as steel demand in construction and manufacturing holds. | →Stable |
| CounterSteel demand is highly correlated with manufacturing PMI and construction activity; any slowdown in North American manufacturing or housing starts could quickly deflate the 46% growth into flat or negative territory. | ||
Free cash flow is currently negative relative to net income at approximately -2% of net income, indicating that capital expenditures are exceeding depreciation and cash earnings are lower than reported net income. Quality breakdown | Free cash flow turns positive relative to net income within 12 months as the capital expenditure cycle for capacity expansion normalizes. | →Stable |
| CounterSteel manufacturers undergoing capacity expansions can sustain negative free cash flow for 2 to 3 years; if the current capex cycle extends, cash flow may remain negative well beyond the 12-month horizon. | ||
The stock is trading well above analyst consensus price targets with approximately negative 14% indicated upside and a reward-to-risk ratio of 0.57 at the current price of $272.19.
→StableTargets
- Expectation
- Analyst consensus price target is upgraded to above $300, more than 10% above current price, following positive earnings revisions driven by the strong growth trajectory over the next 12 months.
CounterSteel stocks are volatile cyclicals, and without sustained earnings beats the analyst target gap may close via price decline rather than target upgrade, producing negative returns from current levels.
Steel Dynamics ranks at the top of its peer group for return on equity and operating margins according to peer comparison data, indicating a structural competitive advantage over the typical steel manufacturer.
↓DeterioratingPeer-rank breakdown
- Expectation
- Return on equity remains among the top quartile of the steel peer group for at least 3 of the next 4 reported quarters, confirming the margin and efficiency advantage is durable.
CounterSteel industry margins are highly cyclical and tied to steel spread (selling price minus raw material cost); a demand slowdown or scrap cost spike could compress margins toward peer average levels within one or two quarters.
Steel Dynamics is generating 46% year-over-year revenue growth alongside strong earnings growth, positioning the company as a cyclical earnings expansion story during current steel market conditions.
→StableBull case
- Expectation
- Revenue growth remains above 10% year-over-year for at least 2 of the next 4 reported quarters as steel demand in construction and manufacturing holds.
CounterSteel demand is highly correlated with manufacturing PMI and construction activity; any slowdown in North American manufacturing or housing starts could quickly deflate the 46% growth into flat or negative territory.
Free cash flow is currently negative relative to net income at approximately -2% of net income, indicating that capital expenditures are exceeding depreciation and cash earnings are lower than reported net income.
→StableQuality breakdown
- Expectation
- Free cash flow turns positive relative to net income within 12 months as the capital expenditure cycle for capacity expansion normalizes.
CounterSteel manufacturers undergoing capacity expansions can sustain negative free cash flow for 2 to 3 years; if the current capex cycle extends, cash flow may remain negative well beyond the 12-month horizon.
Per-dimension breakdown
Quality
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 6.9 |
| ROA | 6.3 |
| Gross margin | 0.0 |
| Op margin | 6.2 |
| Net margin | 4.4 |
| Current ratio | 9.9 |
| FCF quality | 1.8 |
| Moat | 6.8 |
| Piotroski F | 7.8 |
- ▸Earnings quality RED FLAG: 22% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
10.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 10.0 |
| EPS growth | 10.0 |
- ▸Strong growth: 35% YoY
Momentum
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 4.5 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.2 |
| Price target | 6.3 |
| erm sentiment | 5.0 |
Insider
6.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 8.6 |
| notable moves | 7.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
- ▸Institutions accumulating
Peer rank
5.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.9 |
| quality rank | 8.5 |
| growth rank | 7.9 |
- ▸Superior ROE vs peers
Technical
2.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.6 |
| support resistance | 0.0 |
| 52w position | 7.4 |
Risk (lower is worse)
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.3 |
| days to cover | 6.5 |
| volatility | 3.3 |
| put call | 5.7 |
| implied vol | 4.9 |
| max pain risk | 3.0 |
| beta | 5.1 |
| debt equity | 8.2 |
- ▸Above max pain $110
Catalyst
4.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 3.2 |
| dividend safety | 5.2 |
- ▸Earnings concerns: 2B/2M
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more. | News modifier -1 (HOLD_IF_HOLDING → SELL_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_HOLD|L3:NEWS_MOD=-1Passed (6)
- MOMENTUM:7.7>=5.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:88d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.4=NEGATIVE
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.41
Upside
-5.1%
Downside
12.4%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 67, MACD bullish
EdgeSector Rotation — Basic Materials sector out of favor, value=7.4
SuitabilityAggressive — Beta 1.49>1.3
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: MOMENTUM:7.7>=5.5. Top dim: Growth at 10.0; weakest: Technical at 2.7. No conviction either direction.
The strongest dimensions are Growth at 10.0, Momentum at 7.7, and Value at 7.4; the weakest are Technical at 2.7, Catalyst at 4.3, and Risk (lower is worse) at 5.6. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -0.41 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Best In Class Peer Margins Roe
Trip ifOperating margin falls below 10% in any 2 consecutive reported quarters, declining toward peer-average levels and signaling the competitive advantage is eroding.
- P2Earnings Growth 46pct Yoy
Trip ifRevenue growth falls below 0% year-over-year in any reported quarter, indicating demand conditions have reversed the growth trajectory.
- P3Negative Free Cash Flow Quality Flag
Trip ifFree cash flow remains below -10% of net income for 2 or more consecutive quarters, indicating the capex cycle is extending beyond expectations.
- P4Analyst Target Reached No Upside
Trip ifStock price drops below $250, more than 8% below the current $272.19, without analyst price target upgrades above $280 within 45 days.