A Look At Ryerson Holding (RYZ) Valuation After Wider Annual Losses And Stable Sales

Ryerson Holding (RYZ) is back in focus after its latest earnings showed a wider net loss for both the fourth quarter and full year, even as sales remained relatively stable year over year.

See our latest analysis for Ryerson Holding.

Ryerson Holding's recent earnings miss and wider losses have coincided with a 7.3% decline in its 30 day share price return and a 4.7% drop over the last trading day. However, the 90 day share price return of 12.4% and 1 year total shareholder return of 7.3% point to momentum that has softened rather than fully reversed.

If earnings volatility has you reassessing metal related names, it could be a good moment to scan our list of 27 elite gold producer stocks as potential alternatives in the materials space.

With Ryerson trading at US$26.16 against a US$31.00 analyst price target and an indicated intrinsic discount, the key question is whether the wider losses have already reset expectations or whether the market is quietly pricing in a rebound in profitability.

Preferred Price to Sales Multiple of 0.3x: Is it justified?

On a P/S of 0.3x, Ryerson Holding screens as inexpensive compared to both its own estimated fair value and the wider Metals and Mining peer group at the latest $26.16 close.

The P/S multiple looks at how much investors are paying for each dollar of revenue, which can be useful for companies that are currently loss making. For Ryerson, revenue of $4,571.3m against a net loss of $56.4m means earnings-based metrics are less helpful right now, so sales-based benchmarks give a clearer starting point.

According to Simply Wall St's checks, Ryerson is trading at 62.9% below an internal fair value estimate and at a P/S of 0.3x versus an estimated fair P/S closer to 1.5x. That gap indicates the current price is well below levels that the SWS model and peer comparisons suggest the market could move towards if sentiment or profitability improves.

The discount is also stark against the US Metals and Mining industry average P/S of 2.7x and a peer average of 1x, which places Ryerson at a steeply lower revenue-based valuation than many of its closest comparables.

Explore the SWS fair ratio for Ryerson Holding

Result: Price-to-Sales of 0.3x (UNDERVALUED)

However, the wider net loss and a 3 year total shareholder return of 30.9% could keep some investors cautious about how quickly sentiment might change.

Find out about the key risks to this Ryerson Holding narrative.

Another View: SWS DCF Model Paints An Even Cheaper Picture

Ryerson already looks inexpensive on a 0.3x P/S, but our DCF model goes further, suggesting fair value around $70.58 versus the current $26.16. That points to a wide gap. The open question is whether future cash flows can justify closing it.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Ryerson Holding for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 46 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Mixed signals or emerging opportunity: either way it makes sense to move quickly, review the underlying data yourself and weigh up the 3 key rewards and 4 important warning signs before deciding what comes next.

Looking for more investment ideas?

If Ryerson has caught your attention, do not stop here. Use this moment to line up a few fresh ideas before the market moves on without you.

• Kick start your watchlist with quality names that look mispriced by checking out our 46 high quality undervalued stocks filtered by strong fundamentals.
• Strengthen your income stream by scanning 15 dividend fortresses that combine higher yields with business models focused on returning cash to shareholders.
• Reduce portfolio stress by reviewing 74 resilient stocks with low risk scores that our models score as more resilient on balance sheet and earnings risk.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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