Tuesday, September 11, 2012

Reliance Steel (RS) 2012 Review


Reliance Steel, RS,  provides value-added metals processing services and distributes more than 100,000 metal products. 

The company has grown profits and dividends at a 13-15% rate and earned a 7-19% return on equity over the last ten years. RS operations were under significant pressure from declining volume and increasing price competition in 2009. However, profits begun growing again as a result of:

(1) despite slow economic growth, it is witnessing improvement in its core customer base (aerospace and energy) resulting in both rising demand and prices,

(2) acquisitions (latest: McKey and National Specialty Alloys),

(3) an excellent cost control discipline.


Negatives:

(1) the lackluster nonresidential construction market is impacting sales of carbon steel,

(2) rising raw material costs.

RS is rated B++ by Value Line, has a debt/equity ratio of approximately 30% and its stock yields 1.3%

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
RS 1.3% 9% 9% 7
IND 2.5 6 33 NA


Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
RS 30% 13% 1 5% B++
IND 40 11 NA 4 NA


Chart

Note: RS stock made good initial progress off its November 2008 low, quickly surpassing the downtrend off the July 2008 high (red line) and the October 2008 trading high (green line). Long term, the stock is in an uptrend (straight blue lines). Intermediate term, it is in a trading range (purple lines). The wiggly blue line is on balance volume. The Aggressive Growth Portfolio owns a 75% position in RS (having made a trading sales at $55) earlier this year. The upper boundary of its Buy Value Range is $26; the lower boundary of its Sell Half Range is $81.




http://finance.yahoo.com/q?s=RS



Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.