Simply put, the PS (price-to-sales) ratio tells us how much investors are willing to pay for each dollar of a company’s sales.
ArcelorMittal and peers
ArcelorMittal (MT) has a PS ratio of 0.42x based on its 2017 consensus revenues and 0.43x based on its 2018 expected revenues. AK Steel (AKS) has the lowest PS ratio in our select group of US steel stocks. Remember, a lower PS ratio can be a sign of a stock’s undervaluation.
Nucor (NUE) and Steel Dynamics (STLD) have similar PS ratios, with both stocks trading at 0.88x based on their 2017 consensus revenues. U.S. Steel (X) has a PS ratio of 0.4x based on its 2017 consensus revenues.
Interestingly, there’s not much difference between steel companies’ 2017 and 2018 PS ratios. This shows that analysts don’t see much revenue growth for steel companies over the next year. Analysts seem to be factoring stable to slightly lower steel prices next year when it comes to their 2018 revenue estimates for steel companies.
But along with revenues, we also need to look at valuations with respect to earnings. Continue to the next part for a closer look.