Is Now the Time to Buy Evraz?

I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 (UKX) and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today I am looking at Evraz  (LSE: EVR  ) to determine whether you should consider buying the shares at 272 pence.

I am assessing each company on several ratios:

  • Price/Earnings (P/E): Does the share look like a good value when compared against its competitors?
  • Price Earnings Growth (PEG): Does the share look like a good value factoring in predicted growth?
  • Yield: Does the share provide a solid income for investors?
  • Dividend Cover: Is the dividend sustainable?

So let's look at the numbers:

Stock

Price

3-year EPS Growth

Projected P/E

PEG

Yield

3-year Dividend Growth

Dividend Cover

Evraz

272p

N/A

17.4

N/A

4.5 %

N/A

N/A

The consensus analyst estimate for next year's earnings per share is 25 U.S. cents (down 30%) and dividend per share is 9 U.S. cents (down 22%).

Firstly, I should say that Evraz has been listed in London in its current form since only late 2011. The group was listed previously in Luxembourg.

Anyway, Evraz is currently trading on a projected P/E of 17.4, which is about the level of the company's peers in the industrial metals sector, who are currently trading on an average P/E of around 17.2. However, I can see Evraz makes up around 66% of the industrial metals sector, so any comparison will be extremely biased toward Evraz.

Unfortunately, the rest of my usual figures for Evraz are for the most part unavailable -- apart from the dividend yield. Evraz currently offers a 4.5% yield, which is the same as the sector average. However, the firm's dividend currently represents 200% of earnings, which leaves no obvious room for further payout growth.

A lack of history but is Evraz destined for better things?
Evraz is a major integrated steel and mining business and the company has operations across the world. However, like the rest of the steel industry, Evraz is suffering from all the well-known economic headwinds. In my opinion, Evraz is suffering more than most as the group has the majority of its operations based within Europe and North America.

Indeed, I can see within the firm's most recent trading statement that total steel sales were down 3% since the previous quarter. In particular, there was a 60% decline in total steel sales within Europe.

This disappointing news comes at a bad time for Evraz. You see, the company recently announced that it had swung from a profit of $260 million to a loss of $50 million for the first six months of 2012. Surprising, despite this loss the group actually raised the dividend by 64%!

Interestingly, however, during the same six-month period, Evraz debts grew by 17%. Although I can spot that, due to clever accounting, the group actually reported a 6% fall in net debt for the period.

Finally, even though the managers at Evraz still remain positive, I believe the company and the dividend are going to come under significant pressure during the next few months. Given all that, plus the short quoted record on the London market, too, I believe now does not look to be a good time to buy Evraz at 272 pence.

More FTSE opportunities
Although I feel now may not be the time to buy Evraz, I am more positive on the FTSE shares highlighted in "8 Dividend Plays Held by Britain's Super Investor." This exclusive report reveals the favorite income stocks owned by Neil Woodford -- the City legend whose portfolios have thrashed the FTSE All-Share by 200% during the 15 years to October 2012.

The report, which explains the full investing logic behind Woodford's dividend strategy and his preferred blue chips, is free to all private investors. Just click here for your copy. But do hurry, as the report is available for a limited time only.

In the meantime, please stay tuned for my next verdict on a FTSE 100 share.

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