April 2, 2004 Schnitzer Steel Industries (SCHN)
Hello Friends! Schnitzer Steel (SCHN) IS a stock that I own, please see the previous post, as I purchased stock for my Trading Account this morning. As always, PLEASE do your own investigation of all of the stocks discussed on this blog and PLEASE check with your investment advisors to make sure that the stock is timely and appropriate for you!

Schnitzer is currently trading at $37.62, up $5.50 on the day or 17.12%. According to the Yahoo "Profile" on Schnitzer, SCHN "...operates in three industry segments: Metal processing and recycling (Metals Recycling Business), mini-mill steel manufacturing (Steel Manufacturing Business) and self-service used auto parts (Auto Parts Business).

What moved the stock today, was the second quarter 2004 earnings report released yesterday after the market close. Revenue for the quarter ended February 29, 2004, jumped to $161.6 million from $124.7 million the prior year. Diluted earnings per share more than doubled to $.89/share from $.44/share last year.

If we look at "5-Yr Restated" financials on Morningstar.com, we can see that revenue has grown from $265 million in 1999 to $534.6 million in the trailing twelve months. Earnings have increased from $.02/share to $1.76/share in the trailing twelve months between 1999 and now.

Morningstar reports that free cash flow, an important measure of the bottom line in my opinion, has improved from $(1) million in 2001, to $27 million in 2002, $19 million in 2003 and $33 million in the trailing twelve months.

The balance sheet looks fine, with $5.0 million in cash and $101.6 million in other current assets as opposed to $36.8 million in current liabilities and $135.7 million in long-term liabilities.

If we take a look at "Key Statistics" on Yahoo.com, we see that the market cap is a mid-cap $1.13 Billion. The trailing p/e is very reasonable at 18.12, with a forward p/e of 14.44 (fye 31-Aug-05). I expect this forward p/e to be dropping in light of the fabulous just announced quarter. The PEG is a little high at 1.99, but again, with a re-evaluation of the growth rate, if this is done, we may see this dropping. Price/sales is 1.80.

Yahoo reports 29.99 million shares outstanding with 24.30 million of them that float. Currently (3/8/04), there are 2.16 million shares out short representing 8.87% of the float or 2.013 trading days. This was up from 2.06 million shares out short the prior month. The current rise in the stock price may very well be a bit of a "squeeze" on the shorts.

SCHN does pay a small dividend of $.10/share yielding 0.21%. The last stock split was a 2:1 split in August, 2003.

If we take a look at the "Point and Figure" Chart on Stockcharts.com, we can see that SCHN broke through a resistance level of $4.75/share in October 2003, and has headed higher since. The chart looks quite strong imho.

Overall, I like this stock a lot. In fact I like it enough that I BOUGHT it. My kids would say if you love it so much why don't you MARRY IT....lol. What I didn't touch on is the Macroeconomic picture that bodes well for SCHN. The best I can tell, this company is a bit of a glorified scrap metal firm, and as I understand it, with the explosive growth of the Chinese economy, there is unprecedented demand for raw materials, especially steel. SCHN is in the right place at the right time. Their earnings are nice, they are generating increasing free cash flow, they even pay a dividend, so what is there NOT to like?

Thanks so much for stopping by! I hope that you enjoy my continuous reviews...if you have any questions, comments, or words of encouragement, please feel free to post them right here on the BLOG, or email me at bobsadviceforstocks@lycos.com I will probably use your email as a reason to make an entry and share this discussion with our growing readership!

Regards again!

Bob