The biggest steel maker in the world, ArcelorMittal (
MT
,
quote
) has a great deal of appeal for emerging market investors. Now
trading close to its 52-week low, this is a steel industry stock
income, growth and value investors should accumulate for the
long term.
[caption id="attachment_61556" align="alignright" width="300"
caption="Lakshmi Mittal"]
[/caption]
Created by a series of mergers and acquisitions, ArcelorMittal
is like the British Empire of yore: the sun never sets on its
holdings.
It has coal mines located in Kazakhstan, Russia, the United
States, and India, and iron ore mines in Algeria, Brazil, Bosnia,
Canada, Kazakhstan, Liberia, Mexico, Ukraine, the United States,
Canada, Mauritania, and India.
The company is led by Lakshmi Mittal, the chairman and chief
executive officer, who owns 40% of the shares and voting shares in
the company. Mittal is one of the richest men in the world, but his
net wealth has fallen with the share price of his
company
.
The stock price has been trading at $14.12, a new low, while the
52-week high for ArcelorMittal is $34.31. With the stock price so
close to its bottom, the dividend yield is at its highest - over
5%. That is more than twice the average paid by a company on the
S&P 500 Index.
ArcelorMittal also has low valuations. The price-to-book ratio
is 0.40, which means the share price is less than the value of the
assets. The price-to-sales ratio is just 0.25, i.e. the stock sells
for a quarter of its annual revenues. Obviously ArcelorMittal is
very appealing to value investors.
For growth investors, earnings-per-share are expected to rise by
50% next year. Over the next half decade, earnings-per-share growth
is expected to check in at 25.12%. Due to the global slowdown, on a
quarterly basis sales are only up 2.34%.
ArcelorMittal's mergers and acquisitions have eaten into its
profits, and its profit margin is only 1.26%. That's miles below
Brazilian steel industry competitor Companhia Siderurgica
Nacional (
SID
,
quote
), which has a profit margin of 26.99%.
The return-on-equity for ArcelorMittal is only 2.03%, compared
to an average ROE of around 15%. For Companhia Siderurgica
Nacional, the return on equity is 50.55%.
The low profit margin is a problem, but Soviet Marshal
Georgy Zhukov
once observed that, "Quantity has a quality of its own." Eventually
ArcelorMittal will grow its profit margin and return-on-equity into
a size comparable to that of the rest of the company. Until then,
emerging market growth, income and value investors can pick up
shares in this steel industry behemoth at a discount.
