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  5. STLC: Please provide an analysis of their latest quarter. [Stelco Holdings Inc.]
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Investment Q&A

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Q: Please provide an analysis of their latest quarter. In your recent article on companies with FCF yield greater than 5%, you included STLC. Is this a company that you would invest in? How would you assess their potential for 2023 and 2024?
Asked by David on July 17, 2023
5i Research Answer:

In the Q1, STLC reported earnings of 18c per share, a big miss from expectations of 62c. Sales were $687M, matching estimates. Revenue fell 24% and earnings fell sharply from last year on lower prices. Shipping volume actually increased. In addition to lower sales, inflationary pressures also cut into earnings. STLC has bought back a massive amount of stock yet still has $400M net cash. It is generating decent free cash flow ($300M+) even at lower prices. It is still closely tied to the economy, and cyclical, but priced right at 6X earnings with a 3.7% dividend. We would be fine owning it, for an investor who has a two to four year time frame and is OK with some inherent volatility. EPS is expected to be down nearly 50% this year and 30% in 2024, based on consensus, as analysts are pricing in a recession (which has yet to occur).