Universal Stainless – overpriced

[i4value]

Nasdaq Universal Stainless & Alloy Products (USAP) manufactures and markets semi-finished and finished specialty steel products. This is a turnaround case. Over the past 11 years, there was no growth in its revenue. The cumulative profit for this period was at the break-even level.

The company faces challenges in operating above its break-even shipment levels and improving its Contribution. The valuation analysis suggests that USAP stock is not currently an attractive investment opportunity due to its historical performance and uncertain prospects for growth.



The market is pricing USAP as if it can consistently ship 65 % more than the past 2 years average shipment tonnage. Furthermore, the Contribution has to be consistently 5% higher than the past 2 years average.

For more insights into other US companies go to “My 43 Non-Bursa stocks that can make money”

[i4value]

Universal Stainless and Alloy Products (USAP) is a US specialty alloy manufacturer. In Sept last year, my analysis showed that there was no margin of safety. As such I opined that it was not an investment opportunity.

However since then the market price had gone up by 80%. Do I regret not buying it?

I just updated my analysis of USAP and reached the same conclusion ie that it is still overpriced. My conclusion was based on USAP being a cyclical company and looking at it from a long-term buy-and-hold perspective. I focus on what drives the long-term business performance – profitability, growth and re-investments. As can be seen from the charts, they are cyclical with little uptrend.



Moral of the story? If you are looking to make money in the next few months, you need to look at a different set of fundamentals. These are indicators of short term performance. You probably also need to cover an analysis of the market sentiments.

I have no idea on how to do the short term analysis. That is why I focus on the long-term in my blog. I may have missed USAP and I do regret not buying. But I think that if you are investing for the long term, you have to trust the process. You may miss one or two such opportunities as USAP, but if you stick to the process, you will be a winner in the long run.

Am I wrong?

[Janeo]

This has been a 3x for me. The trick to cyclicals is to buy when rev/margins are at the low ends of historical range and sell them when those peak. You can't evaluate all stocks using a buy/hold LT mentality.