Reliance Steel
provides value-added metals processing services and distributes more than
100,000 metal products. The company has
grown profits and dividends at a 17-18% rate and earned a 7-19% return on
equity over the last ten years. RS
operations remain under significant pressure from declining volume and
increasing price competition. However,
profits begun growing again as a result of:
(1) despite slow
economic growth, it is witnessing improvement in its core customer base
(aerospace and energy) resulting in both rising demand and prices,
(2) acquisitions
(latest: Metals USA),
(3) an excellent
cost control discipline.
Negatives:
(1) the
lackluster nonresidential construction market is impacting sales of carbon
steel,
(2) rising raw
material costs,
(3) industry
overcapacity.
RS is rated B++
by Value Line, has a debt/equity ratio of approximately 23% and its stock
yields 1.8%
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2003
RS 1.8% 17 19% 8
Debt/ EPS Down Net Value Line
Equity ROE
Since 2003 Margin Rating
RS 23% 12% 2 4% B++
Chart
Note:
RS stock made good progress off its December 2008 low, quickly surpassing the
downtrend off its June 2008 high (red line) and the November 2008 trading high
(green line). Long term, the stock is in
an uptrend (straight blue lines).
Intermediate term it is in an uptrend (purple lines). The wiggly blue line is on balance volume. The Aggressive Growth Portfolio owns a full position
in RS. The upper boundary of its Buy
Value Range Sell
Half Range
9/13
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