Reliance Steel & Aluminum – no margin of safety

[i4value]

Reliance Steel & Aluminum Company (NYSE:RS) is a leading diversified metal solutions provider and the largest metals service center company in North America.

Its revenue doubled in the past 12 years, but growth was driven more by changes in selling price than tonnage. Based on the shipment tonnage, it is not a high growth company. This is despite its acquisitions.

The company operates in a cyclical industry. But it has not been able to mitigate the cyclical effects by diversifying its products, customers, and international presence.

Despite improvements in operating efficiencies and a strong financial position, the valuation of RS does not offer a margin of safety.

[i4value]

Reliance Steel and Aluminum is one of the biggest metal distribtor in the US. Steel products accounted for more than 2/3 of its products. Steel is a cyclical sector. Irrespective of where the company is listed, the most appropriate way to assess and value it is to look at the performance over the cycle.

On such a basis I found that despite some improvements in operating efficiencies and a strong financial position, my valuation did not show any margin of safety. Have a look at my updated valuation at page 20 in INVEST