Steel Dynamics Inc. (STLD) fair value

ACCE thesis

Steel Dynamics runs electric arc furnace mills that make flat-rolled steel, structural and rail products, and steel recycling operations, so its input is largely scrap rather than iron ore and coking coal. That scrap-based model is the core of the franchise: it sits lower on the cost curve than integrated blast furnace producers and has been able to keep its pricing close to import parity when domestic demand is firm. Revenue growth of 34.8% and a 20.8% ROE show how sharply earnings have swung with steel pricing, so the cycle is the main thing to underwrite. The stock trades at 11.2 times forward earnings against 17.7 times trailing, which tells you the market expects profits to decline from current levels, so the question for a PM is whether the cycle has peaked or whether the forward multiple is pricing in too much normalization. With a 15.5% operating margin and a 79/100 score, it merits a deeper look focused on realized steel spreads and scrap costs over the next few quarters.