Now trading at a price of $21.5, Cleveland-Cliffs has moved -0.6% so far today. In contrast, the S&P 500 index moved -0.6%. Read below for a basic value analysis of Cleveland-Cliffs.
Cleveland-Cliffs shares moved 26.1% over the last 52 weeks, with a high of $34.04 and a low of $11.83. During this time, the stock outperformed the S&P 500 index by 36.0%. As of January 2022, the company's 50-day average price is $17.0. Cleveland-Cliffs Inc. operates as a flat-rolled steel producer in North America. The mid-cap Basic Materials company has 27,000 full time employees and is based in Cleveland, OH. Cleveland-Cliffs has not offered any dividends in the last year.
Snapshot of the Company's Weak Operating Margins and erratic debt levels:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | |
|---|---|---|---|
| Revenue (MM) | $1,990 | $5,354 | $20,444 |
| Revenue Growth | n/a | 169.06% | 281.85% |
| Gross Margins | 28.9% | 4.7% | 22.2% |
| Gross Margins Growth | n/a | -83.74% | 372.34% |
| Operating Margins | 21.6% | -1.0% | 19.7% |
| Operating Margins Growth | n/a | -104.63% | 2070.0% |
| Earnings Per Share | $1.03 | -$0.32 | $5.36 |
| EPS Growth | n/a | -131.07% | 1775.0% |
| Free Cash Flow (MM) | -$94 | -$786 | $2,080 |
| FCF Growth | n/a | -740.64% | 364.63% |
| Capital Expenditures (MM) | -$656 | -$525 | -$705 |
| Net Debt / EBITDA | 3.41 | 16.86 | 1.01 |
Cleveland-Cliffs Is Overpriced:
Compared to the Basic Materials sector's average of 8.57, Cleveland-Cliffs has a trailing twelve month P/E ratio of 4.6 and, according to its EPS guidance of 1.8, an expected P/E ratio of 11.9. Cleveland-Cliffs's PEG ratio is 0.01 based on its 526.0% annual average growth rate of historical and projected earnings per share. However, we believe that it is more prudent to calculate the PEG ratio using the broader market's 5-year expected EPS growth rate of 13.05%, because the growth rate implied by Cleveland-Cliffs's past and expected EPS is probably not sustainable. This more prudent approach shows a PEG ratio of 0.35, which still suggests that company's shares are possibly undervalued.
Furthermore, Cleveland-Cliffs is likely undervalued in terms of its equity because its P/B ratio is 1.6 compared to its sector average of 1.86. The company's shares are currently trading -13.5% below their Graham number, implying there is a margin of safety for the stock. The Graham number is calculated according to the formula:
√(22.5 * 3-year average EPS * book value per share) = √(22.5 * 2.02 * 13.6) = $24.86
Cleveland-Cliffs Is the Subject of Mixed Market Indicators:
11 analysts are following Cleveland-Cliffs and have set target prices ranging from $13 to $27 per share. On average, they have given the company a rating of hold. At the current price of $21.5, CLF is trading 7.39% away from its average analyst target price of $20.02 per share, implying an analyst consensus of little upside potential for the stock.
The company has an above average percentage of its shares sold short since 8.4% of the company's shares are tied to short positions. Institutions own 67.5% of Cleveland-Cliffs's shares, while the insider ownership rate stands at 1.41%. The biggest shareholder is Blackrock Inc. with a 10% stake in the company worth approximately $1,163,337,114.
