Schnitzer Steel Industries Class A rises with rising open interest, institutional shareholder Heartland Advisors Inc. buys 14 May 2019

NEWS BITES - NORTH AMERICA

Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), the NASDAQ's 2nd largest Steel company by market cap, has increased 19.0c (0.8%) from its previous trading session to close at $US22.64 on Tuesday. Compared with the NASDAQ-100 Index which rose 77.8 points (1.1%) in the day, the relative price change was -0.2%. The volume was 0.3 times the average daily trading volume of 309,590 shares. Schnitzer Steel Industries Class A's stock's open interest soared 44.2% from 982 to 1,416. Combined with the price increase, this suggests a strong stock price. There were 107,200 shares worth $US2.4 million traded today. Its MCap is $US600 million.

SCHNITZER STEEL INDUSTRIES CLASS A DIVIDENDS

The shares dropped 3.8% in the 2 trading sessions since the ex-dividend date of May 10. The company paid a dividend of 18.75c per share. Based on dividends of 56.25c per share for the trailing twelve months and the last price of $US22.64 the dividend yield is 2.5%.

TODAY'S NEWS

INSTITUTIONAL BUYING

Schnitzer Steel Industries Class A (NASDAQ:SCHN) institutional shareholder Heartland Advisors Inc. (CIK:0000937394) bought 260,188 shares in the quarter ended March 31, 2019 worth $US6.2 million at an estimated Volume Weighted Average Price (VWAP) of USD23.44. At the end of the quarter Heartland Advisors Inc. held 671,427 shares worth $US15.7 million, representing 2.50% of the issued capital of Schnitzer Steel Industries Class A. The net increase in holdings over the last two years and nine months was 271,427 shares (68% of the shares held two years and nine months ago).

INSTITUTIONAL SELLING

Schnitzer Steel Industries Class A (NASDAQ:SCHN) institutional shareholder Allianz Asset Management AG (CIK:0001535323) sold 57,894 shares in the quarter ended March 31, 2019 worth $US1.4 million at an estimated Volume Weighted Average Price (VWAP) of USD23.44. At the end of the quarter Allianz Asset Management AG held 113,810 shares worth $US2.7 million.

Highlights in today's Report:

SECTION 1 TODAY'S BULLISH SIGNALS

SECTION 2 TODAY'S BEARISH SIGNALS

SECTION 3 PRICE VOLUME DYNAMICS

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF $US22.64):

SECTION 4 THE PAST WEEK

SECTION 5 BULLISH PARAMETERS

SECTION 6 BEARISH PARAMETERS

SECTION 7 REPORTED BUYING AND SELLING

SECTION 8 SUMMARY FINANCIALS

SECTION 9 CORPORATE PROFILE

SECTION 1 SCHNITZER STEEL INDUSTRIES CLASS A BULLISH SIGNALS

1.1 Undervaluation [compared with sector average]:

+ Price/Earnings of 4 [5.8]. The P/E of 4.0 plus annual inflation in the United States of 1.9% adds up to 5.9, well within the value benchmark Rule of 19.

+ The reciprocal of P/E or Earnings yield of 25.0% is 10.4 times the 10-year bond yield of 2.41%.

+ To quote Benjamin Graham: "A dividend yield of at least two-thirds the triple-A bond yield"; the stock's dividend yield equals the triple-A bond yield of 2.4%.

+ The relative yield of SCHN, defined by its yield of 2.5%, divided by average yield of dividend yielding stocks in the NASDAQ-100 Index of 1.0% is 243.1%. This suggests Schnitzer Steel Industries Class A stock is undervalued in dividend yield terms.

+ Price/Sales of 0.2 [0.5]. We estimate Schnitzer Steel Industries Class A stock is trading at a current year Price/Sales of 0.2 and a forward year Price/Sales of 0.1.

+ Price to Book of 1.2 [1.8]. We estimate Schnitzer Steel Industries Class A stock is trading at a current year Price to Book of 1 and a forward year Price to Book of 0.8.

+ The P/E of 4 multiplied by the P/NTA of 1.2 is 4.8. Being less than the Benjamin Graham benchmark of 22.5 the stock appears undervalued.

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 0.5. Compared with the rest of the market the stock is undervalued.

1.2 Undervaluation Indicators and rank of Schnitzer Steel Industries Class A in the NASDAQ market:

DescriptionValueRank In Market
Price/Earnings4In Top 4%
Price to Sales0.2In Top 7%
P/E * P/NTA4.84In Top 8%

1.3 Rising open interest with rising price:

+ Open Interest Trend

Same day trend: The price increased 0.8% from $US22.45 to $US22.64; Open interest has soared 44.2% from 982 to 1,416. A price rise combined with an increase in open interest suggests there is new money coming into the market from existing or new buyers. This is a bullish signal.

DurationOpen Interest change %Price change %Interpretation
1-day44.20.8Strong Market

+ Put Call Contracts

The Put/Call ratio has declined from 2.532 to 1.364 suggesting an uptrend.

Put ContractsCall ContractsPut/Call ratio
Today8175991.364
Previous day7042782.532

1.4 Short Selling:

+ The current short volume is 0.7 times its own historical average of 0.8%.

1.5 Oversold/Bullish Signals:

+ The stock is oversold according to the Williams % R indicator of -86.9, suggesting the price is close to its 14-day low of $US22.27.

SECTION 2 SCHNITZER STEEL INDUSTRIES CLASS A BEARISH SIGNALS

2.1 Overvaluation Indicators and rank of Schnitzer Steel Industries Class A in the NASDAQ market:

DescriptionValueRank In Market
EV/EBITDA5.0In Bottom 7%

2.2 Downtrend:

+ Schnitzer Steel Industries, Inc. is placed 1609/2479 in BuySellSignals' ranking of NASDAQ performers in the past week, a percentile ranking of 35.

+ In the past week, volume was 0.6 times average and the shares were down 3.7%. Tuesday's close price is at a 1.5% discount to its 5-day Volume Weighted Average Price (VWAP) of $US23.0.

+ The present value of $US1,000 (PV1000) invested one month ago in Schnitzer Steel Industries Class A is $US925, comprising a capital loss of $US82 and dividend reinvested of $US7.

SECTION 3 SCHNITZER STEEL INDUSTRIES CLASS A PRICE VOLUME DYNAMICS

Volatility:

+ Schnitzer Steel Industries Class A is at a discount of 39.0% to its 12-month high of $US37.12 on July 10, 2018. It is also at a premium of 9.8% to the 12-month low of $US20.61 on January 02, 2019.

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF $US22.64):

SECTION 4 THE PAST WEEK

4.1 Snapshot: Schnitzer Steel Industries Class A stock was down 86.06c or 3.7% in the past week. Volume in the week was 0.6 times average trading of 1.5 million shares. It underperformed the NASDAQ-100 index in 3 out of 5 days.

DaySchnitzer Steel Industries Class AClose price [USD]Price change %Relative change %Comment
MondayPut call ratio increases 88.0%22.45-4.6-1.1Steepest Fall
FridayAdds $US1.3 million in MCap23.531.11.1Top Rise
ThursdayRises with rising open interest23.260.61.1
WednesdayLoses $US10.1 million in MCap23.12-1.6-1.3
TuesdayFalls for a second consecutive day23.5-3.0-1.0

SECTION 5 SCHNITZER STEEL INDUSTRIES CLASS A BULLISH PARAMETERS

5.1 Performance:

+ Return on Assets 14.5% [12.9%].

+ As per the Du Pont analysis, Return on Equity [ROE] is high at 23.8%; an improvement from 8.7% last year. ROE is computed as net profit margin of 6.8% times asset turnover [sales/assets] of 2.1 times leverage factor [total assets/shareholders' equity] of 1.6.

YOY Improvement in ROE and Profit Margin

Du Pont AnalysisROEProfit MarginAsset TurnoverEquity Multiplier
Current Year23.86.82.11.6
Previous Year8.72.81.81.7

5.2 Low Debt Indicators:

+ The debt to equity ratio of 16.0% is under a safe benchmark figure of 50%. Moreover, it has improved in the past three years.

+ Total Liabilities/EBITDA of 3.1 is comfortably below the Joseph Piotroski benchmark of 5.

5.3 High Performance Indicators and rank of Schnitzer Steel Industries Class A in the NASDAQ market:

DescriptionValueRank In Market
Return on Assets [ROA] %14.5In Top Quartile
Return on Equity [ROE] %23.8In Top Quartile

5.4 Increased ADVT past five years

Avg. Daily Volume Traded 12 months ended May 14, thousand shares

YearADVT
2019309.6
2018359.1
2017404.5
2016424.6
2015286.1

In the past five years, Average Daily Volume of Trading (ADVT) has increased 8.2% to 309,590 shares.

5.5 Increased VWAP

Past five years, 12 months ended May 14 (USD)

YearHigh PriceVWAPLow Price
201937.1226.7220.61
201837.7727.6318.0
201729.5320.6414.31
201620.8116.111.29
201527.3819.9914.53

In the past five years Volume Weighted Average Price (VWAP) has increased by 33.6% to $US26.72. Based on a dynamic start date of five years ago, there have been declines in VWAP in 2 out of 5 years.

5.6 Increased Average Daily Turnover

Past five years, 12 months ended May 14 (USD million)

YearAverage Daily Turnover
20198.3
201810.0
20178.4
20166.9
20155.8

In the past five years, average daily share turnover has increased 43.5% to $US8.3 million. This suggests increased liquidity.

5.7 Increase in Institutional Ownership

Quarter-endSeptember 30, 2018December 31, 2018
Holdings (%)84.086.2

As at December 31, 2018 Institutions held 86.2% of total shares on issue; an increase from 84.0% as at September 30, 2018.

SECTION 6 SCHNITZER STEEL INDUSTRIES CLASS A BEARISH PARAMETERS

6.1 Performance:

+ Return on Equity 23.8% [26.3%].

+ Return on Capital Employed 16.7% [19.4%].

+ Net profit margin has averaged 2.8% in the last 3 years. This suggests the company is less profitable with a low margin of safety.

6.2 Low Performance Indicators and rank of Schnitzer Steel Industries Class A in the NASDAQ market:

DescriptionValueRank In Market
EBITDA Margin %6In Bottom Quartile

6.3 Moving Annual Return (Past 5 years)

Based on a dynamic start date of 5 years ago, the real rate of return has averaged 5.7%. The Moving Annual Return has been positive in 2 out of 5 years.

SCHNClose (USD)Dividends (USD)Capital Gain / (Loss) %% YieldAnnual Return %
May 1422.640.56(24.1)1.9(22.2)
1 Yr ago29.840.9459.8564.8
2 Yrs ago18.670.75184.722.7
3 Yrs ago15.830.75(5.7)4.5(1.2)
4 Yrs ago16.780.56(37.5)2.1(35.4)

Close 5 years ago $US26.87

6.4 Increase in Insider Selling

In the past 5 years a total of 152,514 Schnitzer Steel Industries Class A shares worth $US3.9 million were sold by insiders. Based on a dynamic start date of 5 years ago, insider selling has averaged 30,503 shares per year. In the past year, insiders sold 82,494 shares, an increase of 207.3% from the previous year.

SECTION 7 SCHNITZER STEEL INDUSTRIES CLASS A REPORTED BUYING AND SELLING

7.1 Institutional Buying and Selling Quarter Ended December 31

Total reported Institutional buying = 2,359,538 shares

Total reported Institutional selling = 3,019,721 shares

Net reported institutional selling = 660,183 shares

7.2 Reported Holdings of Institutions as at Dec 31, 2018

Total = 22,856,152 shares

Market Value = $US484.8 million

SECTION 8 SCHNITZER STEEL INDUSTRIES CLASS A SUMMARY FINANCIALS

8.1 Dividend History

+ Trailing 12 months dividend for the 12 months ended May 14 was unchanged at 56.25c.

8.2 Financials Summary

Year endedAug 2018Aug 2017Aug 2016
Sales (USD B)2.41.71.4
Pretax (USD M)141.948.7(15.5)
Net (USD M)156.544.5(19.4)
EPS (USD)5.661.62(0.71)

+ Net profit was up 251.5% from US$44.5 million in 2017 to US$156.5 million in 2018.

+ Earnings Per Share (EPS) was up 249.4% from $US1.62 to $US5.66.

SECTION 9 CORPORATE PROFILE

9.1 Activities

Schnitzer Steel Industries, Inc. is a recycler of ferrous and non-ferrous metals. The Company is a recycler of used and salvaged vehicles, and a manufacturer of finished steel products. The Company provides an end of life cycle solution for a variety of products through its vertically integrated businesses, including sale of used auto parts, procuring autobodies and other metal products and manufacturing them into finished steel products. It operates in three business segments: the Metals Recycling Business (MRB), the Auto Parts Business (APB) and the Steel Manufacturing Business (SMB). In September 2007, the Company acquired a mobile metals recycling business that provides additional sources of scrap metal to the Everett, Massachusetts facility. In February 2008, it acquired the remaining 50% equity interest in Pick-N-Pull Auto Dismantlers, LLC Nevada. In August 2008, the Company acquired a self-service used auto parts business with three locations in the Southern United States.

9.2 Top Management

The chairman is John D. Carter, the chief executive officer is Tamara L. Lundgren and the chief financial officer is Richard D. Peach.

9.3 Issued Capital and MCap

Based on 26,502,000 issued shares the market capitalisation is $US600 million.

9.4 Vanguard Total World Stock ETF 7580:

The stock was one of 7580 global stocks selected by Vanguard Total World Stock ETF (VT). As at Mar 31, 2019, the Vanguard Total World Stock ETF held 8,000 shares worth $US190,651 by value of the ETF's portfolio [Ranked 5309 out of 7580 by value and 660 out of 679 for NASDAQ].

COMPANY IDENTIFIERS

Contact: +1 503 224-9900

Physical Address: 299 SW Clay Street, Suite 350, Portland, OR,97210

State/Province/Country: OR, United States

Country of Incorporation: United States

Industry [NAICS]: 331110

Exchange: NASDAQ

Economic Sector: Basic Materials

Business Sector: Mineral Resources

Industry Group: Metals & Mining

Industry: Steel

ISIN: US8068821060

O:SCHN; SCHN.O

PermID: 4295907880

RIC: SCHN.O

CIK: 912603

CUSIP: 806882106

Schnitzer Steel Industries Inc, Schnitzer Steel Industries Inc Class A, Schnitzer Steel Industries, Inc, Schnitzer Steel Industries, Inc Class A

Source: www.BuySellSignals.com