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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of manufacturer Olympic Steel (NASDAQ: ZEUS ) dropped 12% today after the company reported earnings.
So what: Third quarter revenue dropped 11.3% to $304 million, missing Wall Street's $331.8 million estimate by a wide margin. On the bottom line, earnings of $0.12 per share were $0.27 below estimates, despite cost reductions.
Now what: Clearly the company's end markets are struggling, and a transition to higher value products is taking time. Despite improved margins, investors may be walking into a value trap in Olympic Steel. Shares trade at just 14 times next year's estimates, but if revenue continues to deteriorate there's nowhere to go but down. I'm definitely not a buyer today, and would wait for revenue improvements before considering the stock.
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