Weer een andere insteek over AM,the motley fool.
ArcelorMittal
You've probably been reading a lot about the U.S. steel industry lately, and the prospects for U.S. steelmakers such as U.S. Steel (natch), AK Steel, and Steel Dynamics profiting from new "Section 232" trade protections levied by the Trump Administration. At first glance, this looks like very bad news for a steelmaker like ArcelorMittal (NYSE:MT), which has only 8% of its steelmaking assets located within the U.S. and safe from those trade protections. This may be why ArcelorMittal's stock is currently valued at less than 8 times earnings.
Is that a bargain price? Things aren't hopeless for Arcelor, after all. True, the company depends on U.S. customers to provide 22% of its sales, while 92% of the company's assets are outside of the U.S. This makes tariffs a real concern. But even if tariffs are raised on its sales to the U.S., 78% of Arcelor's revenues would remain abroad and safe from the tariffs' effect. Furthermore, Arcelor could probably ramp up production at its U.S. steel mills to avoid the bulk of those tariffs that would otherwise hurt its sales.
What worries me more about Arcelor is the fact that, while its stock looks cheap when valued on GAAP earnings, S&P Global Market Intelligence figures show that only about 20% of the company's net income is backed up by real free cash flow, which amounted to only $661 million over the past 12 months. With free cash flow weak, Arcelor has resorted to piling a lot of debt on its books -- about $12.1 billion net of cash, which makes its stock look even more expensive to me.
Arcelor, therefore, seems to me a case of a stock with a low P/E that's simply not as cheap as it looks