Stock Is an Attractive Long-Term

¶ … stock is an attractive long-term valuation. In fundamental analysis, investors are always looking at various ratios to tell if the company is oversold or overbought in relation to the price of the stock. Where, they will compare the different financial ratios of the company, with key competitors to indentify the strongest within the industry. To determine how effective this theory is in the real world requires: an examination takes place by looking at the three companies and comparing the various financial ratios, to identify the most attractive long-term valuations. This will be accomplished by looking at U.S. Steel, Nucor and Arcelor Mittal. Once this analysis is complete, is when you will have the greatest insights as to which company has the most promising long-term valuations.

To perform an accurate comparison several different financial ratios will be utilized to include: the trailing PE ratio, the forward PE ratio, the current ratio, the put call ratio, the price dividend ratio and the beta. The two PE ratios will tell you how expensive the company is in relation to the earnings. These ratios were chosen because they allow investors to see how expensive or cheap the price of stock is in comparison with traditional valuations. The current ratio, will show the total amounts of the debt that the company has in relation to it revenues. This will tell you the company's ability to pay its overall amounts of debt in comparison with the revenues. The put call ratio shows the overall amounts of positive or negative sentiment in the stock. This is an important contrarian indicator, which can help confirm overbought / oversold conditions. The price dividend ratio will tell you how expensive or cheap the price of the stock is in comparison with the dividends that are being paid. The beta factor will tell you how volatile the stock is in relation to the markets. The combination of these different ratios can help you be able to determine the strongest companies that have outstanding long-term valuations.

When you look at U.S. Steel, the company has a trailing PE ratio of -5.65 and forward PE ratio of 7.14. The current ratio is 2.09 and the put call ratio is .80. The price dividend ratio is 0 and the beta is 2.71. ("U.S. Steel," 2010) Nue Core Steel has a trailing PE ratio of -177 and forward PE ratio of 11.52. The current ratio is 3.54 and the put call ratio is .75. The price dividend ratio is 0, while the beta is 1.00. ("Nue Core," 2010) Arcelor Mittal has trailing PE ratio of 23.28 and a forward PE ratio of 7.09. The current ratio is 1.35 and the put call ratio is .55. The price dividend ratio is 45.74, while the beta is 2.70. ("Arcelor Mittal," 2010)

Upon doing a side by side comparison, Arcelor Mittal is the strongest company out of three. This is because their PE ratios remained more stable over the past year and the reading of 7.09 on the forward PE ratio, is an attractive long-term valuation. The high put call ratio indicates that investors have become somewhat pessimistic in the stock. The price dividend ratio is the only drawback, where historically this number should be in the 14 to 17 range. However, given the volatile nature of the steel industry, the fact that they are continuing to pay dividends after a severe recession is a sign of financial strength. The beta factor highlights that the price of the stock is nearly three times as volatile as the markets. ("Arcelor Mittal," 2010)