STLD Steel Dynamics
Best-in-class EAF steelmaker, but price assumes near-peak spreads persist; mid-cycle economics justify less.
The story
Steel Dynamics is the lowest-cost, most profitable US electric-arc-furnace steelmaker. Its moat is a flexible scrap-based cost structure, vertical integration into metals recycling and fabrication, and tariff-protected domestic demand. The company is a mature cyclical coming off a 2022 peak-margin trough, and it is adding a new growth leg with the Columbus flat-rolled aluminum mill and the Sinton flat-rolled ramp.
TTM revenue is 20.5B, up from 18.2B, and the aluminum ramp supports roughly 7% near-term growth. Margins should revert to a through-cycle average of about 14.5%, which sits between the 8.6% trough and the 23% peak and reflects STLD's best-in-class EAF economics plus tariff support, not peak spreads. Sales-to-capital holds near the historical 1.6, and beta sits slightly above the 1.1 industry anchor for cyclicality. Because the market price is roughly 3x the baseline, I leaned toward mid-cycle rather than trough economics.
Value drivers
| Revenue growth (Y1) | 7.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 8y |
| Target operating margin | 14.5% |
| Years to target margin | 4 |
| Sales-to-capital | 1.60 |
| Beta | 1.20 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 10.0% |
| Terminal WACC | 9.2% |
Valuation bridge
| PV of explicit FCFF | 10.72B |
| PV of terminal value | 20.58B |
| Equity value | 27.33B |
| ÷ shares → per share | $190.70 |
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 21.98B | 7.0% | 11.4% | 2.00B | 898.57M | 1.10B | 996.81M |
| 2 | 23.39B | 6.4% | 12.4% | 2.31B | 882.98M | 1.43B | 1.18B |
| 3 | 24.76B | 5.9% | 13.5% | 2.65B | 856.21M | 1.80B | 1.35B |
| 4 | 26.07B | 5.3% | 14.5% | 3.01B | 817.93M | 2.19B | 1.49B |
| 5 | 27.30B | 4.7% | 14.5% | 3.15B | 768.07M | 2.38B | 1.47B |
| 6 | 28.43B | 4.1% | 14.5% | 3.28B | 706.79M | 2.57B | 1.45B |
| 7 | 29.44B | 3.6% | 14.5% | 3.40B | 634.54M | 2.76B | 1.41B |
| 8 | 30.33B | 3.0% | 14.5% | 3.50B | 552.05M | 2.94B | 1.37B |
Key risks
- Steel price and spread compression if tariffs ease or imports and new EAF capacity flood the US market
- Aluminum mill ramp costs, delays, or weak can-sheet and auto pricing
- Scrap cost inflation squeezing EAF metal spreads
Catalysts
- Columbus aluminum mill reaching profitable run-rate volumes
- Sustained Section 232 tariffs and infrastructure/reshoring demand lifting spreads