At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." Here, we'll use Motley Fool CAPS to analyze analysts' scorecards, point out the strengths and flaws -- and let you decide whether Wall Street's advice holds water.

When Germans attack
Wednesday was a bad day for U.S. steel investors, and especially, uh, U.S. Steel (NYSE: X) investors. Steel Dynamics (Nasdaq: STLD), AK Steel (NYSE: AKS), Reliance Steel (NYSE: RS), and even Nucor (NYSE: NUE) all took hits of various sizes in response to negative comments from Deutsche Bank yesterday. But U.S. Steel suffered an actual downgrade from Deutsche, and fell 6% in response.

Basically, Deutsche told investors that things have gone too well for too long. The analyst noted that "since late-Oct, DB covered steel stocks have rallied 25%" as steel prices rose 24%. Thus, steel company share prices are closely tracking the value of the material they produce. Unfortunately, Deutsche argued that the "rising input costs and lean inventories" that inspire higher steel prices cannot increase forever. We're nearing a peak, the banker said, and it's time to pull back on steel exposure.

Deutsche promptly downgraded U.S. Steel to "hold." Was its call correct?

Let's go to the tape
At first glance, you might not think so. When picking winning stocks in the  metals and mining industry, few analysts sport records worse than Deutsche's:

Companies

Deutsche Said:

CAPS says:

Deutsche's Picks Beating (Lagging) S&P By:

AK Steel Outperform **** 11 points
Nucor Outperform **** 36 points
U.S. Steel Outperform **** 44 points (picked twice)

Honestly, the banker hasn't had much luck outside the U.S., either. Deutsche has twice bet wrong on local European steel champion ArcelorMittal (NYSE: MT) and Russian steel giant Mechel OAO (NYSE: MTL), racking  up losses-to-the-market of 40 and 26 percentage points, respectively. The analyst's record of 35% accuracy in this industry is truly abysmal.

That said …
Deutsche may have been wrong to endorse U.S. Steel at all, but I'd rather it admit its mistake than keep silent. Deutsche is finally right today: You really should not buy U.S. Steel stock.

Fools generally want to find and own profitable businesses. Based on trailing-12-month results, U.S. Steel is anything but, having lost a cool half-billion dollars over the past 12 months. It's actually done even worse, since GAAP accounting methods understate the severity of U.S. Steel's "issues." According to the company's cash flow statements, U.S. Steel may have only "lost" $500 million, but it's burned through more than $1.2 billion in cash over the past year.

That's arguably a worse performance than AK Steel (barely profitable, but also burning cash) has turned in. It's certainly worse than the numbers produced by many of the other stocks named above. At the very least, Steel Dynamics, Reliance, and Nucor all turn profits and generate positive free cash flow, albeit not as much as their GAAP numbers suggest. Until U.S. Steel can say the same, I'd avoid the stock.

Time to chime in
As you can probably imagine, with free cash flow notably lagging reported GAAP "profits" at basically every steel company you can name, I have no interest in investing in this industry at today's prices. So while I'm not necessarily taking Deutsche's advice to avoid U.S. Steel, I do agree with it.

That's my opinion. Now it's your turn to play analyst on these stocks. Do you buy Deutsche's "don't-buy" thesis, or are you more optimistic about U.S. Steel than we are? Click over to Motley Fool CAPS today, and tell us what you think.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 638 out of more than 170,000 members. Nucor is a Motley Fool Stock Advisor recommendation and a Fool holding. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.