Contrasting United States Steel (X) and Steel Dynamics (STLD)

United States Steel (NYSE: X) and Steel Dynamics (NASDAQ:STLD) are both basic materials companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, risk, analyst recommendations, earnings, dividends, profitability and institutional ownership.

Profitability

This table compares United States Steel and Steel Dynamics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
United States Steel 5.08% 20.82% 6.46%
Steel Dynamics 8.52% 21.48% 9.44%

Earnings and Valuation

This table compares United States Steel and Steel Dynamics’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
United States Steel $12.25 billion 0.53 $387.00 million $2.18 16.88
Steel Dynamics $9.54 billion 1.11 $812.74 million $3.37 13.31

Steel Dynamics has lower revenue, but higher earnings than United States Steel. Steel Dynamics is trading at a lower price-to-earnings ratio than United States Steel, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings for United States Steel and Steel Dynamics, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
United States Steel 2 7 9 0 2.39
Steel Dynamics 0 3 12 0 2.80

United States Steel currently has a consensus price target of $32.12, indicating a potential downside of 12.72%. Steel Dynamics has a consensus price target of $46.64, indicating a potential upside of 3.97%. Given Steel Dynamics’ stronger consensus rating and higher possible upside, analysts clearly believe Steel Dynamics is more favorable than United States Steel.

Risk & Volatility

United States Steel has a beta of 3.08, meaning that its share price is 208% more volatile than the S&P 500. Comparatively, Steel Dynamics has a beta of 1.34, meaning that its share price is 34% more volatile than the S&P 500.

Dividends

United States Steel pays an annual dividend of $0.20 per share and has a dividend yield of 0.5%. Steel Dynamics pays an annual dividend of $0.62 per share and has a dividend yield of 1.4%. United States Steel pays out 9.2% of its earnings in the form of a dividend. Steel Dynamics pays out 18.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Institutional & Insider Ownership

64.3% of United States Steel shares are owned by institutional investors. Comparatively, 83.5% of Steel Dynamics shares are owned by institutional investors. 1.0% of United States Steel shares are owned by insiders. Comparatively, 4.2% of Steel Dynamics shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Steel Dynamics beats United States Steel on 12 of the 16 factors compared between the two stocks.

About United States Steel

United States Steel Corporation is an integrated steel producer. The Company is engaged in producing flat-rolled and tubular products with production operations in North America and Europe. The Company operates through three segments: Flat-Rolled Products (Flat-Rolled), U. S. Steel Europe (USSE) and Tubular Products (Tubular). The Flat-Rolled segment includes the operating results of its integrated steel plants and equity investees in the United States involved in the production of slabs, rounds, strip mill plates, sheets and tin mill products, as well as all iron ore and coke production facilities in the United States. The USSE segment includes the operating results of U. S. Steel Kosice (USSK) and its integrated steel plant and coke production facilities in Slovakia. The Tubular segment includes the operating results of its tubular production facilities, primarily in the United States and equity investees in the United States and Brazil.

About Steel Dynamics

Steel Dynamics, Inc. is a steel producing and a metal recycling company. The Company is engaged in the manufacture and sale of steel products, processing and sale of recycled ferrous and nonferrous metals, and fabrication and sale of steel joists and deck products. Its segments include steel operations, metals recycling operations, steel fabrication operations and Other Operations. It offers a range of steel products, such as sheet products, long products and steel finishing. The steel operations segment includes Butler Flat Roll Division, Columbus Flat Roll Division, The Techs galvanizing lines, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, Steel of West Virginia and Iron Dynamics. The metals recycling operations segment consists of OmniSource Corporation. The fabrication operations produce steel building components. The Other Operations segment consists of subsidiary operations and smaller joint ventures.

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