Is Stelco Stock Discounted Right Now?

Stelco Holdings (TSX:STLC) stock spiked 7.7% in mid-afternoon trading on October 11. Shares moved with the broader market which enjoyed a rally due to news of a U.S.-China trade truce. Stelco stock is still down 28% in 2019 so far.

In the second quarter Stelco reported revenues of $431 million which were down 39% from the prior year. This was primarily due to a 27% drop in steel shipping volumes and a 15% decline in average steel selling prices. Lower income dragged down operating income by 98% to $159 million.

The sector has battled strong headwinds in 2019. In its earnings Stelco specifically named destocking, falling market prices, and continued 232 tariffs as issues that negatively impacted the company during the quarter. Still, Stelco managed to lower its cost per ton and generate positive cash flow. Is the stock worth buying at current levels as we approach the middle of October?

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Shares of Stelco slipped into technically oversold territory in late September but have since rebounded to neutral levels with an RSI of 47 at the time of this writing. However, the stock boasts a favourable price-to-earnings ratio of 2.9 and a price-to-book value of 1.7. Stelco offers a quarterly dividend of $0.10 per share. With the price retreat, this now represents a solid 4.2% yield.

Stelco stock is in attractive price territory right now. Value and income investors should consider adding the stock at current levels, especially if the trade war shows signs of subsiding.