PB (price-to-book-value) ratios, among the most basic ways to assess companies’ valuation, tell us how a company’s valuation compares with its book value. Notably, growth stocks tend to have higher PB ratios, while mature industries have lower ratios.
Comparing PB ratios
AK Steel (AKS) does not have a trailing PB ratio due to its negative shareholder equity, which is a result of accumulated losses. However, analysts expect AK Steel’s book value per share to turn positive this year.
ArcelorMittal (MT) has a trailing PB ratio of 0.85x, the lowest among the steel stocks (XME) we’re covering in this series, and U.S. Steel Corporation (X) has a trailing PB ratio of 1.7x and an estimated PB ratio of 1.6x for this year. Steel Dynamics (STLD) has the highest trailing PB ratio of 3.1x, and Nucor’s (NUE) trailing PB ratio is 2.3x.
Although PB ratios provide some insight into a company’s valuation, investors should read them in conjunction with other ratios—especially those related to income statements. Most US steel companies expect their earnings to rise sequentially in the second quarter, and further in the second half of the year as higher spot steel prices flow into sales. In the next part, we’ll compare steel companies’ PS (price-to-sales) ratios.