Nucor Corporation Valuation – December 2016 $NUE

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Nucor Corporation (NUE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Nucor Corporation (Nucor) manufactures steel and steel products. The Company also produces direct reduced iron (DRI) for use in the Company’s steel mills. It also processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron (HBI) and DRI. Nucor operates in three segments: steel mills, steel products and raw materials. Its steel mills segment produces and distributes sheet steel (hot-rolled, cold-rolled and galvanized), plate steel, structural steel (wide-flange beams, beam blanks, H-piling and sheet piling) and bar steel (blooms, billets, concrete reinforcing bar, merchant bar, wire rod and special bar quality). Its steel products segment produces steel joists and joist girders, steel deck, fabricated concrete reinforcing steel and cold finished steel. Its raw materials segment produces DRI; brokers ferrous and nonferrous metals, pig iron, HBI and DRI; supplies ferro-alloys, and processes ferrous and nonferrous scrap metal.

NUE Chart

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of NUE – December 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,985,038,984 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.53 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -45.29% Fail
6. Moderate PEmg Ratio PEmg < 20 34.44 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.51 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.90 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.76
MG Growth Estimate 2.15%
MG Value $22.51
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $25.49
MG Value based on 0% Growth $14.94
Market Implied Growth Rate 12.97%
Current Price $60.54
% of Intrinsic Value 268.91%

Nucor Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.54 in 2012 to an estimated $1.76 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Nucor Corporation revealed the company was trading above its Graham Number of $34.1. The company pays a dividend of $1.5 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 34.45, which was below the industry average of 35.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.14.

Nucor Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.14
Graham Number $34.10
PEmg 34.45
Current Ratio 3.53
PB Ratio 2.51
Current Dividend $1.50
Dividend Yield 2.48%
Number of Consecutive Years of Dividend Growth 7


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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $6,700,422,000
Total Current Liabilities $1,898,487,000
Long-Term Debt $4,338,347,000
Total Assets $15,113,679,000
Intangible Assets $2,784,468,000
Total Liabilities $7,386,433,000
Shares Outstanding (Diluted Average) 320,028,000

Earnings Per Share History

Next Fiscal Year Estimate $2.13
Dec2015 $1.11
Dec2014 $2.22
Dec2013 $1.52
Dec2012 $1.58
Dec2011 $2.45
Dec2010 $0.42
Dec2009 -$0.94
Dec2008 $5.98
Dec2007 $4.94
Dec2006 $5.68
Dec2005 $4.15
Dec2004 $3.50
Dec2003 $0.20
Dec2002 $0.52
Dec2001 $0.36
Dec2000 $0.95
Dec1999 $0.70
Dec1998 $0.75
Dec1997 $0.84
Dec1996 $0.71

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.76
Dec2015 $1.64
Dec2014 $1.82
Dec2013 $1.41
Dec2012 $1.54
Dec2011 $1.87
Dec2010 $2.12
Dec2009 $3.30
Dec2008 $5.23
Dec2007 $4.47
Dec2006 $3.76
Dec2005 $2.45
Dec2004 $1.44
Dec2003 $0.45
Dec2002 $0.60
Dec2001 $0.67
Dec2000 $0.81

Recommended Reading:

Other ModernGraham posts about the company

Nucor Corp Valuation – August 2016 $NUE
Nucor Corp Valuation – February 2016 Update $NUE
Nucor Corporation Analysis – September 2015 Update $NUE
Nucor Corporation Analysis – June 2015 Update $NUE
23 Companies in the Spotlight This Week – 3/9/15

Other ModernGraham posts about related companies

Nucor Corp Valuation – August 2016 $NUE
United States Steel Corp Valuation – July 2016 $X
Nucor Corp Valuation – February 2016 Update $NUE
Allegheny Technologies Inc. Valuation – November 2015 Update $ATI
Nucor Corporation Analysis – September 2015 Update $NUE
Cliffs Natural Resources Inc. Analysis – August 2015 Update $CLF
Nucor Corporation Analysis – June 2015 Update $NUE
Nucor Corporation Quarterly Valuation – March 2015 $NUE
United States Steel Corporation Annual Valuation – 2015 $X
Nucor Corporation Quarterly Valuation – December 2014 $NUE


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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