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With Arcelor Mittal (MT) trading at the bottom end of its 52 week range, I decided to take a closer look into the company to see if it is an attractive opportunity. Here are five key, positive points I identified at while researching MT.

The consensus price target for the analysts who follow MT is $30. That is upside of 54% and suggests that the stock room to run from these levels. MT is currently trading at $19.49 and analysts expect the company to report earnings of $2.35 a share next year for a forward P/E of 8.3. MT's revenues are projected to be flat next year. Taking a look at ratios for comps will give us a better idea of the relative valuation of MT. Ternium (TX) is trading at a forward multiple of 6.3 with revenue growth projected to be 0.5%. Mechel is trading at a forward multiple of 3.8 with revenue projected to grow 4.5%. Gerdau (GGB) is trading at a forward multiple of 7.7 with revenue growth projected to be at 9.6% next year. Posco (PKX) is trading at a forward multiple of 8.3 and revenue growth is projected to be 1.4% next year. Nucor (NUE) is trading at a forward multiple of 13.7 with revenue growth projected to be 5.3% next year. U.S. Steel (X) is trading at a forward multiple of 11.0 with revenue growth projected to be 3.2% next year. The average forward P/E ratio of the six steel stocks is 8.5 suggesting that MT is fairly valued on a forward P/E basis.

As for earnings, Mittal missed EPS estimates two of the last four quarters by wide margins. Only one of the last four quarters was the earnings figure close to consensus estimates. This suggests that analysts do not have a good grasp of MT's operations and earnings may provide support for the stock. MT started consistently paying a dividend in 2005 and it varies with the state of the steel markets. Its current quarterly dividend is at 18.8 cents a share for an annual yield of 3.8%. The dividend was 37.5 cents a quarter in 2008 before it cut to its current level of 18.8 cents a share as the economy and the steel market were in rough shape.


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From the chart, the stock was relatively stable the first six months of last year before falling apart in July and falling below $15 a share. It did find some support at the $15 level and has traded in a range between $22 and $15 since October. The stock is above its 50 day moving average, which is at $18.39 currently, and below its 200 day moving average, which is at $25.39 currently. On the upside, the $20 and $22 levels should serve as key resistance levels while $18 and $15 should serve as strong support levels on the downside. MT looks fairly valued on a relative value basis, but undervalued on an absolute level. On a discounted cash flow basis, shares are worth $30 apiece. I'd feel comfortable taking a position in MT here as steel should lead the economy into an expansionary period. You also receive exposure to the world economy with MT as it has plants and customers in all parts of the world. The dividend yield of nearly 4% should attract some income investors.

Source: Arcelor Mittal: An Attractive Prospect As Steel Leads The Economy