Is Now the Time to Invest in Gerdau S.A. (GGB)?

Is Now the Time to Invest in Gerdau S.A. (GGB)?


Many stocks have been testing new highs in 2020, and one of the most notable is Gerdau S.A. (GGB). Currently, GGB is trading at $3.22 and the avg recommendation for the stock is Moderate Buy. while the current analyst price target stands at $4.00.

To add more color to this target, the company’s high over the last year is $5.34 and the low is $1.65. Over the last 52 weeks, GGB is down -39.73% while the S&P 500 is up 1.21%. The catalyst for this interesting swing was the company’s recent earnings report.

A Notable Earnings Report

In the last quarter, GGB reported a profit of $193.25 million. Gerdau S.A. also saw revenues increase to $2.08 billion. In addition, GGB has free cash flow of $155.78 million as of 03-2020 The company’s EBITDA came in at $232.69 million which compares well with its peers.

GGB booked profit margins of 2.50%, its Return on Equity (ROE) is 3.50%, and its Return on Assets is 1.80%. All told, it is clear that, GGB needs to be on your watchlist.

About Gerdau S.A.

If readers are unfamiliar, Gerdau S.A. provides steel products and services in the United States and Canada. It operates through four segments: Brazil Operations, North America Operations, South America Operations, and Special Steel Operations. The company offers semi-finished products, including billets, blooms, and slabs; common long rolled products, such as rebars, wire rods, merchant bars, light shapes, and profiles to construction and manufacturing industries; and drawn products comprises barbed and barbless fence wires, galvanized wires, fences, concrete reinforcing wire meshes, nails, and clamps. It also produces special steel products used in auto parts, light and heavy vehicles, and agricultural machinery, as well as the oil and gas, wind energy, machinery and equipment, mining and rail, and others markets. In addition, the company offers flat products, including hot rolled coils and heavy plates; and resells flat steel products, as well as mines and produces iron ore. It sells its products through independent distributors, direct sales from the mills, and its retail network. The company was founded in 1901 and is headquartered in Sao Paulo, Brazil. Gerdau S.A. is a subsidiary of Metalurgica Gerdau S.A.

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Of course, we must look beyond the financials and question how well those numbers represent the sustainable earnings power of the business. Investors need to know how sustainable this current run. GGB has a short ratio of 4.02 and outstanding shares of 1.70B.

Company Outlook

GGB has seen increased volume after this news and investors are putting their support behind the value proposition. Furthermore, 10-day volume stands at 15.41 million and more growth is possible in the weeks ahead. Traders will also note the company’s earnings per share came in at 0.11. Gerdau S.A. GGB also noted assets of $13.7 billion at the end of the last quarter. Investors should also keep an eye on sector updates as GGB has historically followed its peers on positive news.

All told, Gerdau S.A. GGB has strung together solid data and demonstrated underlying fundamentals. At its current valuation, GGB represents an interesting risk/reward case. Traders should stay tuned to see if this recent report will push the stock to test recent resistance levels.

Gerdau S.A. GGB is now commanding a market cap of 5.07B and a float of 1.09B. GGB is increasing its credibility in this sector and that could lead to more upside down the line. Sign-up for continuing coverage on shares of GGB stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in GGB, either long or short, and we have not been compensated for this article.