Why Don't We See More Analyst Enthusiasm for United States Steel (X)?

United States Steel may be undervalued, but the 10 analysts following the company give it an rating of hold. Their target prices range from $20.0 to $37.0 per share, for an average of $29.27. At today's price of $24.52, United States Steel is trading -16.23% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.

United States Steel Corporation produces and sells tubular and flat rolled steel products primarily in North America and Europe. The mid-cap Industrials company is based in Pittsburgh, PA. United States Steel has provided a 0.74% dividend yield over the last 12 months.

United States Steel has a trailing twelve month P/E ratio of 2.96, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of 1.7, the company has a forward P/E ratio of 14.42.

The average annual growth rate of the company's historical and projected earnings per share is 15.8%. On this basis, the company's PEG ratio is 0.19. However, this growth rate is probably not sustainable. In its place we will use the broader market's estimated 5-year EPS growth rate of 13.05%, which gives us a PEG ratio of 0.23. Even with this more conservative assumption on EPS growth, the PEG ratio suggests that United States Steel shares are underpriced.

Furthermore, the market is potentially undervaluing United States Steel in terms of its book value because its P/B ratio is 0.57. In comparison, the sector average P/B ratio is 3.78. The company's shares are currently -64.5% below their Graham number, indicating that its shares have a margin of safety.

So why are analysts giving X a bad rating? We believe analysts could be alarmed by the company's disappointing -40.84% rate of cash flow growth over the last 5 years. Furthermore, United States Steel has slim margins as you can see in the financial summary below.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $12,937 $9,741 $20,275 $21,065
Revenue Growth n/a -24.7% 108.14% 3.9%
Gross Margins -8.87% -5.13% 24.11% 17.15%
Gross Margins Growth n/a 42.16% 569.98% -28.87%
Operating Margins -1.78% -11.04% 24.39% 15.0%
Operating Margins Growth n/a -520.22% 320.92% -38.5%
Earnings Per Share -$3.71 -$5.28 $15.51 $10.86
EPS Growth n/a -42.32% 393.75% -29.98%
Diluted Shares (MM) 170 221 269 232
Free Cash Flow (MM) -$570 -$587 $3,227 $1,736
FCF Growth n/a -2.98% 649.74% -46.2%
Capital Expenditures (MM) $1,252 $725 $863 $1,769
Net Debt / EBITDA -9.6 -3.24 0.25 0.13
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.