Critical Analysis: AK Steel (AKS) & Steel Dynamics (STLD)

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

Valuation and Earnings

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This table compares AK Steel and Steel Dynamics’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AK Steel $6.08 billion 0.25 $6.19 million $0.31 15.29
Steel Dynamics $9.54 billion 1.15 $812.74 million $2.65 17.54

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

Profitability

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

Net Margins Return on Equity Return on Assets
AK Steel 0.16% 71.24% 2.64%
Steel Dynamics 8.52% 21.48% 9.44%

Dividends

Steel Dynamics pays an annual dividend of $0.75 per share and has a dividend yield of 1.6%. AK Steel does not pay a dividend. Steel Dynamics pays out 28.3% of its earnings in the form of a dividend.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for AK Steel and Steel Dynamics, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AK Steel 1 9 5 0 2.27
Steel Dynamics 0 3 12 0 2.80

AK Steel presently has a consensus price target of $6.57, suggesting a potential upside of 38.64%. Steel Dynamics has a consensus price target of $49.29, suggesting a potential upside of 6.01%. Given AK Steel’s higher possible upside, equities analysts clearly believe AK Steel is more favorable than Steel Dynamics.

Insider and Institutional Ownership

67.8% of AK Steel shares are owned by institutional investors. Comparatively, 85.4% of Steel Dynamics shares are owned by institutional investors. 1.1% of AK Steel shares are owned by insiders. Comparatively, 4.4% of Steel Dynamics shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Volatility & Risk

AK Steel has a beta of 2.89, indicating that its share price is 189% more volatile than the S&P 500. Comparatively, Steel Dynamics has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500.

Summary

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

AK Steel Company Profile

AK Steel Holding Corporation, through its subsidiary, AK Steel Corporation, produces flat-rolled carbon, stainless, and electrical steels, and tubular products in the United States and internationally. It produces flat-rolled carbon steel products, including coated, cold-rolled, and hot-rolled carbon steel products; grain-oriented specialty stainless and electrical steels; and carbon and stainless steel tubing products. The company also buys and sells steel and steel products, as well as other materials; and produces metallurgical coal from reserves in Somerset County, Pennsylvania. It sells its flat-rolled carbon steel products primarily to automotive manufacturers; customers in the infrastructure and manufacturing markets, including the manufacturers of power transmission and distribution transformers, who produce equipment for the electrical grid, as well as electrical motors and generators; and manufacturers of heating, ventilation and air conditioning equipment, and appliances. The company also sells its carbon steel products to distributors, service centers, and converters. AK Steel Holding Corporation was founded in 1993 and is headquartered in West Chester, Ohio.

Steel Dynamics Company Profile

Steel Dynamics, Inc., together with its subsidiaries, engages in the steel products manufacturing and metals recycling businesses in the United States and internationally. The company operates through three segments: Steel Operations, Metals Recycling Operations, and Steel Fabrication Operations. The Steel Operations segment provides hot roll, cold roll, and coated steel products; structural steel beams, pilings, and standard and premium grade rail products; engineered special-bar-quality products; merchant bar products, including angles, merchant rounds, flats, channels, and reinforcing bars; beams, channels, and specialty steel sections; and threaded rod products, and cold drawn and heat treated bars. Its products are used in construction, automotive, manufacturing, transportation, heavy and agriculture equipment, and pipe and tube industry sectors. This segment sells its products directly to end-users, steel fabricators, and service centers. The Metals Recycling Operations segment is involved in the purchase, process, and resale of ferrous and nonferrous scrap metals into reusable forms and grades. Its ferrous products include heavy melting steel, busheling, bundled scrap, shredded scrap, steel turnings, and cast iron products; and nonferrous products comprise aluminum, brass, copper, stainless steel, and other nonferrous metals. This segment also provides transportation logistics, scrap management, marketing, and brokerage services. The Steel Fabrication Operations segment produces steel building components comprising steel joists, girders, trusses, and steel deck products for non-residential steel fabricators. Steel Dynamics, Inc. was founded in 1993 and is headquartered in Fort Wayne, Indiana.

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