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With steel prices on the rise this stock has the potential for a 90% upside

With steel prices on the rise this stock has the potential for a 90% upside
Dino Kurbegovic

Despite steel prices easing out of their seven-month peak, the commodity is still highly-priced. The rise of steel prices began in September of 2021 but exploded when Russia decided to invade Ukraine.  

The recent pullback in steel prices is mostly related to new lockdowns in China, which some market participants would deem as a transitory issue for the markets. 

Yet, the predominant trend for 2022 in terms of the prices is a slow but steady rise to all-time highs seen in September 2021. 

Source: Steel Rebar prices per tone

Market participants might be weighing, which companies stand to benefit from this rise in steel prices, with European companies perhaps being best positioned to take advantage of the commodity price. Thus, Finbold has carried out an in-depth analysis of one stock that might benefit from a rise in steel prices. 

Arcelor Mittal (NYSE: MT)

Arcelor is not just a steel pure play since the company also engages in mining operations across North America, Brazil, and Africa. In the Q1 2022 earnings report the company’s profits jumped to $4.13 billion from $2.29 billion a year earlier. Sales surged 35% to $21.84 billion.

MT did, however, mention that they see a contraction in global steel demand this year, predicting a 1% drop, thus revising their full-year outlook slightly. Shareholders of the company will be rewarded this year as the company announced they will be buying back $1 billion worth of its shares. To further sweeten the deal the 1.20% dividend yield seems secure. 

Shares are down roughly 16% year-to-date (YTD), and in the last trading session, the price breached March 2022 resistance line. High trading volumes in May have seen the shares move in a wide range, staying below all daily Simple Moving Averages (SMAs) looking to create new resistance lines. 

 MT 20-50-200 SMA lines chart. Source. data. See more stocks here.

Despite the more recent poor performance of the shares, analysts give the stock a moderate buy with bullish price predictions. The average price the analysts see in the next 12 months is $51.50, which represents a whopping increase of 93.70% from the current trading price of $26.59.

Source: TipRanks

MT is Europe’s largest steel producer having its fingers in production from the ground all the way to delivery of the finished product. Recent quarterly performance indicates that the company seems to be in a good financial position with increasing sales. 

A solid dividend could ensure peace of mind for investors while the share price settles and finds a decent resistance position. Investors not in the stock could possibly stand to benefit from entering while the shares are down

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

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