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Opinions The Panic-Proof Portfolio (Stockchase Research)
Algoma Steel Group IncASTL.TOTOP PICKFeb 09, 2023
Stock price when the opinion was issued
As of Jun 19, 2026. Market Open.
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Premium contentPremium contentEPS of $0.24 missed estimates of $0.3067 and revenues of $732.6M beat expectations of $692.38M. Revenue of $732.6M, increased from $599.2M, and income from operations rose substantially. Its Adjusted EBITDA margin shrunk from 13.8% in the prior year to 11.1% in the recent quarter. Its results were negatively impacted by declines in steel prices due to labor stoppages at auto manufacturers in the US. Management expects a recovery in steel demand and pricing, however. Its balance sheet expanded, and its free cash flow grew. This was an OK quarter, and share prices are largely unchanged. It trades at a decent valuation of 0.4X forward sales and 7.1X forward earnings and pays a dividend of 2.7%. It may hover around these prices until a recovery in steel demand and pricing returns.
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Premium contentASTL is one of Canada's largest steel producers. It trades at 6x earnings, under book value and supports a 19% ROE. Previously reported earnings indicated cost over runs and project delays that we feel have been fully discounted into the price. Meanwhile plate mill modernization is moving ahead of schedule. Its dividend is backed by a payout ratio under 20% of cash flow. We recommend a stop-loss at $8.50, looking to achieve $12.50 -- upside potential over 21%. Yield 2.6%
(Analysts’ price target is $12.75)
Premium contentOur PAST TOP PICK with ASTL has triggered its stop at $9.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 2%, when combined with the previous buy recommendation.
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Jason Mann
We again reiterate this Canadian based steel producer as a TOP PICK. Trading at under book value and supporting a 66% ROE it remains good value. The company is growing cash reserves while it aggressively retires debt. Its dividend is backed by a payout ratio under 10% of cash flow. We recommend trailing up the stop-loss (from $7.50) to $8.50, looking to achieve $13.25 -- upside potential over 21%. Yield 2.4%.
(Analysts’ price target is $13.21)