If you are looking for a long term investment, could Nucor (NYSE:NUE) be the answer? Unlike Apple (NASDAQ:AAPL) , Tesla (NASDAQ:TSLA), Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT), Nucor is not a hot stock. But the world has insatiable demand for steel, and that demand is likely to bounce back next year. Besides, Nucor is trading cheaply right now. Even before the pandemic hit, the company’s market multiple had declined to an attractive point. Our dashboard Nucor Is Trading Cheaply briefly summarizes why the steel company could potentially be a good buying opportunity.

uncaptioned

So why may Nucor be a reasonable bet? There are 3 reasons. First, At the end of 2019, Nucor’s stock was trading at $55, nearly 20% higher than where it is now. That’s a significant drop from a value investment standpoint considering that the demand for steel is not going anywhere. The product will sell as soon as the world comes out of its pandemic-induced economic slowdown. Second, at the end of 2019, Nucor’s stock price implied a trailing EV/EBITDA multiple of 7.3. While this figure was meaningfully higher than that in 2018, it was still below the multiples seen in 2016 and 2017.

In addition, the figure was also lower than that for the mining and metals industry – 7.3 vs 9.5, suggesting room for improvement. Now there may be genuine reasons behind this lower multiple such as a decline in steel prices and weakened demand conditions.

However, when you take into account the additional hit taken by the stock due to Covid-19, and fundamental drivers of steel demand, the buying opportunity becomes clearer. Third, this consistent decline in market multiple has occurred despite nearly 40% growth in revenue between 2016 and 2019, while almost sustaining operating margins. In fact, another metals and mining company, Freeport-McMoRan, while not steel focused, has a much higher EV/EBITDA multiple of 15 despite having a lower operating margin compared to Nucor.

Considering the above, we think that as demand rebounds, Nucor stock could climb.Recommended For You

So, Nucor might give good returns from current levels. But, what if you’re looking for a more balanced portfolio instead? Here’s a top quality portfolio to outperform the market, with 170% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk. It has outperformed the broader market year after year, consistently.