Is United States Steel a steal?

Benjamin Tay Binming

WHILE the US stock market is tumbling downwards, there is a selected group of stocks that are defying the overall US stock market.

One example of such a stock is the United States Steel Corporation (NYSE: X).

What is so intriguing about the stock?

After a downtrend which started in March 2018 and ended in July 2020, the share price of United States Steel Corporation has risen dramatically.

This growth can be attributed to astute business investments and management.

As recent as 2021, United States Steel Corporation acquired Big River Steel and completed the construction of its mini mill, propelling it to innovate and produce steel that consists of as much as 90 per cent recycled steel.

To decide if the shares of United States Steel Corporation are indeed a steal, we need to look at several key aspects of financial data and analyse its price chart.

Fundamental analysis

With reference to stock analytics from POEMS, United States Steel Corporation’s key financial data outshines its peers.

The company has the second-best return on asset and return on equity among its peers. It has the lowest price-to-earnings and price-to-book value ratio and the highest earnings per share.  

Apart from that, its net income, total assets, net operating cash flow and free cash flow to equity have been growing at a phenomenal rate.

Fundamentally, the company is strong and healthy.

Is United States Steel Corporation strong from a technical standpoint as well?

Technical analysis

From the chart, it is noted that the price of United States Steel Corporation is at the lower boundary of its channel.

It can also be observed that it is between its support zone at around US$23 and its immediate resistance zone at around US$28. Above this immediate resistance zone is another resistance zone at around US$38.

These price zones tell us the likely regions the price of United States Steel Corporation is to turn or face potential obstacles.

The two indicators on the chart are the volume and relative strength index (RSI) indicators (top and bottom, respectively).

In the month of May 2022, the price of United States Steel Corporation went sideways with low volume after a drop in April 2022. This is a positive sign as it suggests a price consolidation, in preparation for the next up move.

Given that the RSI value is climbing and that its reading is in the neutral zone, the price of United States Steel Corporation is likely to rise in the near to mid-term.

Key takeaway

United States Steel Corporation has a strong management that is capable of producing stellar results.

The chart of United States Steel Corporation looks promising, especially when its share price is near its bottom channel along with the RSI indicator showing signs of bullishness in the near to mid-term, possibly hitting the US$38 mark.

United States Steel Corporation is therefore an investment grade stock to watch closely. 

The writer is dealer, contract for differences, at Phillip Securities