Steel Dynamics Inc (STLD)

Conclusion

Steel Dynamics Inc is a United States steel producer and metal recycler with four operating segments: steel, metals recycling, steel fabrication and aluminum. At a price of 227.56 USD on 2026-11-09, the company has a market capitalisation of 32.36 billion USD.

The verdict is overvalued. The price-to-earnings ratio of 16.5 is a 46.4% premium to its ten-year median of 11.3, and EV to EBITDA of 10.2 is a 28.3% premium to its median of 7.9. The discounted cash flow gives 137.24 USD per share at a discount rate of 12.11%. The fair value band runs from 119.58 to 179.38 USD with a midpoint of 149.48 USD, giving a margin of safety of -34.3% at the current price. The fair value from historical multiples is 161.72 USD. The reverse DCF implies revenue growth of 18.2% a year, while revenue has compounded at 13.6% over five years.

The strongest supports are the net debt to EBITDA of 0.94, the Altman Z-score of 5.90, and ROIC of 17.2% against a WACC of 11.2%. The weakest numbers are free cash flow conversion of 55.9% over the last twelve months, three-year EPS compound growth of -27.5%, and a price-to-free-cash-flow ratio of 29.6, a 161.0% premium to its median of 11.3.

Financial health

Financial strength is green, held up by all four of its assessed measures: a current ratio of 3.14, a net debt to EBITDA of 0.94, interest coverage of 20.5 and an Altman Z-score of 5.90. The quick ratio is 1.32 and debt to equity is 0.43. The Altman model was designed for manufacturers, and this company is one, so its zone of safe is directly relevant. Insolvency risk is low, about 0.2% by the estimate of the Ohlson model over one to two years. The balance sheet is not a source of concern at current levels.

Earnings quality

Earnings quality is yellow. Free cash flow conversion is 55.9% over the last twelve months and 57.9% over five years, which the scorecard rates as weak. The accrual ratio is -1.7%, and stock-based compensation is only 0.3% of revenue, leaving free cash flow after stock compensation at 1.03 billion USD. The share count fell at a five-year compound rate of -6.9%, which reflects buybacks. The Piotroski score is 5 out of 9. The Beneish M-score is not available. The company beat earnings estimates in 5 of the last 8 quarters, with an average surprise of 2.3%. Next-year estimates have been revised up by 13.4% over 90 days, with 9 upward revisions in the last 30 days against 1 downward. Current-year estimates have been revised down, with 5 downward revisions in the last 30 days and none upward.

Profitability

Profitability is green. The gross margin is 15.8% against its ten-year median of 16.9%, the operating margin is 12.0% against a median of 11.1%, and the net margin is 8.8% against a median of 8.6%. The operating margin stability reading is 0.40. The most important figure is ROIC of 17.2% against a WACC of 11.2%, which gives a ROIC minus WACC of 6.1% and means the company creates value. ROIC has a five-year median of 25.5%, so the current return sits below its recent history. The DuPont split for the latest annual year shows a net margin of 6.5%, an asset turnover of 1.11 and an equity multiplier of 1.83. Return on equity of 19.9% is therefore supported mainly by margins and asset use, not by leverage.

Growth

Growth is green, but the three-year trend is negative. Revenue compounded at -6.5% over three years, 13.6% over five years and 9.1% over ten years. EPS compounded at -27.5% over three years and 25.2% over five years. Free cash flow per share fell at -44.0% over three years and -1.2% over ten years. Revenue grew in 6 of the last 10 years. The next-year EPS estimate implies growth of 22.2%, which is the main support for the current green colour.

Valuation

Valuation is red. The price-to-earnings ratio of 16.5 compares with a ten-year median of 11.3, a premium of 46.4%. EV to EBITDA of 10.2 compares with a median of 7.9, a premium of 28.3%. Price to sales of 1.46 compares with a median of 1.04, a premium of 39.8%, and price to book of 3.29 compares with a median of 2.34, a premium of 40.7%. The DCF gives 137.24 USD per share at a discount rate of 12.11%. The fair value from historical multiples is 161.72 USD. These are order-of-magnitude figures built on fixed assumptions, including a 5% equity risk premium and capped growth. They are not price targets. The reverse DCF implies growth of 18.2%, against 13.6% revenue compound growth over five years. The dividend yield is 0.9%, and the dividend uses 27.2% of free cash flow.

Risks

Free cash flow conversion of 55.9% means that roughly 44% of reported earnings did not turn into cash over the last twelve months. A continued fall in free cash flow per share, down 44.0% over three years, would weaken the case for buybacks and dividends. Three-year EPS compound growth of -27.5% shows that earnings have already declined, and the current-year estimate revisions are negative. A fall in demand that reduces margins would matter most, because the operating margin of 12.0% sits above its median, leaving less room if it reverts. The Beneish M-score is not available, so a manipulation screen cannot be reported. This analysis has no debt maturity schedule and no revenue split by segment, so refinancing risk and the contribution of each business cannot be assessed.