Why Olympic Steel's Shares Dropped

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.

Opportunities in a growing market
The steel market is struggling, but opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2013." To find out which stock it is and read our in-depth report, simply click here. It's free!


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2708500, ~/Articles/ArticleHandler.aspx, 9/20/2014 12:07:46 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement