Down Over 20%, Is U.S. Steel Stock A Buy Now?

U.S. Steel stock (NYSE: X) has declined 18% in just the last one week, completely underperforming the S&P 500 which was down 4% during this period. If you look at the change over the last ten days and one month, the stock has declined (-24% and -22%, respectively) and underperformed the broader market on both the occasions. The decline was driven by a drop in steel prices. To put things in perspective, in September 2021, the hot-rolled coil (HRC) price was $1,970/ton when the lead times were 6-8 weeks and capacity utilization was around 85%. Compare this to 26^th January 2022, where the HRC price is around $1,200/ton, while lead times are 3-4 weeks with capacity utilization still remaining above 80%. The steel industry has over produced at the end of 2021 leading to price correction and inventory builds. This has led to a significant decline in stock prices of almost all of the major steel companies. Additionally, the recent decline in the broader market due to economic and geopolitical factors, has also exacerbated this decline in steel company stocks.

Now, is X stock set to decline further or could we expect some recovery? We believe that there is a 61% chance of a rise in X stock over the next month (21 trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on X Stock Chance of Rise.

We estimate U.S. Steel’s valuation to be around $33 per share, which is 70% above its current market price. This represents a P/S multiple of close to 1x for the company – as can be seen in our dashboard analysis for U.S. Steel’s EBITDA.

Twenty-One Day: X -22%, vs. S&P500 -9.3%; Underperformed market

(8% likelihood event; 61% probability of rise over next 21 days)

• X stock decreased 22% the last twenty-one trading days (one month), compared to a broader market (S&P500) drop of 9.3%
• A change of -22% or more over twenty-one trading days is an 8% likelihood event, which has occurred 209 times out of 2515 in the last ten years
• Of these 209 instances, the stock has seen a positive movement over the next twenty-one trading days on 127 occasions
• This points to a 61% probability for the stock rising over the next twenty-one trading days

Ten Day: X -24%, vs. S&P500 -7.8%; Underperformed market

(1% likelihood event; 51% probability of rise over next 10 days)

• X stock decreased 24% over the last ten trading days (two weeks), compared to a broader market (S&P500) drop of 7.8%
• A change of -24% or more over ten trading days is a 1% likelihood event, which has occurred 37 times out of 2516 in the last ten years
• Of these 37 instances, the stock has seen a positive movement over the next ten trading days on 19 occasions
• This points to a 51% probability for the stock rising over the next ten trading days

Five Day: X -18%, vs. S&P500 -4.1%; Underperformed market

(1% likelihood event; 25% probability of rise over next five days)

• X stock decreased 18% over a five-day trading period till 01/26/2022, compared to the broader market (S&P500) drop of 4.1%
• A change of -18% or more over five trading days (one week) is a 1% likelihood event, which has occurred 32 times out of 2516 in the last ten years
• Of these 32 instances, the stock has seen a positive movement over the next five trading days on 8 occasions
• This points to a 25% probability for the stock rising over the next five trading days

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

[1] Month-to-date and year-to-date as of 1/27/2022
[2] Cumulative total returns since the end of 2016

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