Nucor Corporation (NUE): A Bull Case Theory

We came across a bullish thesis on Nucor Corporation (NUE) on ValueInvesting subreddit page by TravelingTramp. In this article, we will summarize the bulls’ thesis on NUE. Nucor Corporation share was trading at $158.09 as of Oct 17^th. NUE’s trailing and forward P/E were 10.93 and 13.61 respectively according to Yahoo Finance.

Nucor Corporation, a leader in the American steel industry, stands out for its resilience and robust financial performance. With a market cap of $36.5 billion, Nucor has generated positive free cash flow for ten consecutive years, totaling approximately $38 billion, which exceeds its current market capitalization.

One of the strongest arguments for investing in Nucor is its impressive financial health. The company boasts only about $7 billion in total debt, complemented by $5.4 billion in cash and equivalents. This allows Nucor to easily pay off its debt, having the capacity to do so from its 2023 free cash flow alone, or from its cash reserves combined with just two of its less profitable years.

When comparing return on invested capital (ROIC), Nucor consistently maintains a positive and strong metric since 2000, with only a slight dip in 2009. In contrast, U.S. Steel has experienced significant fluctuations, with five years of negative free cash flow in the last decade, underscoring Nucor’s reliability. Additionally, Nucor’s commitment to returning capital to shareholders is evident through its status as a dividend aristocrat, having increased dividends for over 50 years. Share buybacks further enhance shareholder value, reducing outstanding shares from 314 million in 2009 to 240 million in 2024.

Although the steel industry has traditionally been cyclical and dependent on steel prices, Nucor has established itself as a robust and resilient competitor in the U.S. market. As long as Nucor continues to return capital to shareholders it is seen as a strong buy at the current market capitalization.

Nucor Corporation is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held NUE at the end of the second quarter which was 39 in the previous quarter. While we acknowledge the risk and potential of NUE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NUE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.