Vale Vs. Cleveland-Cliffs: Which Steel Stock Is A Better Buy?

Past and Expected Financial Performance

VALE’s EBITDA and revenue increased at CAGRs of 33.6% and 24.3%, respectively, over the past three years. Its EBIT and total assets also increased at CAGRs of 39.7% and 13.4%, respectively, over the same period.

Analysts expect VALE’s revenue to increase 90.2% in the current quarter ending June 30, 2021, 30.1% in fiscal 2021 and decline by 9.8% in fiscal 2022. VALE’s EPS is expected to increase 378.3% in the current quarter, 285% in the current fiscal 2021 but decline by 23.3% in the next fiscal 2022. Its EPS is expected to increase at a rate of 34% over the next five years.

In comparison,  CLF’s EBITDA and revenue increased at CAGRs of 3.8% and 169.1%, respectively, over the past three years. Its total assets also increased at a CAGR of 78.4%, but its EBIT declined by 16.5% over the same period.

CLF’s revenue is expected to increase 360.3% in the current quarter ending June 30, 2021, 263.3% in the current fiscal 2021 and decline by 10.1% in fiscal 2022. Its EPS is expected to increase 532.1% in the current quarter, 782.6% in fiscal 2021 but decline by 54.1% in fiscal 2022. CLF’s EPS is expected to grow at a rate of 27.4% over the next five years.

Profitability

VALE’s trailing-12-month revenue is 7.5 times  CLF’s. VALE is also more profitable with a gross profit margin of 52.7% versus CLF’s 8.9%.

However, VALE’s ROE compares favorably with CLF’s negative value. And VALE’s ROA of 14.4% looks profitable over CLF’s 1.4%. VALE’s $14.48 billion of cash from operations compares favorably with CLF’s negative value.

Valuation

In terms of forward non-GAAP P/E, CLF is currently trading at 11.17x, 86.5% higher than VALE, which is currently trading at 5.99x. Also, CLF is more expensive in terms of trailing-12-month EV/EBITDA, CLF’s 29.74x is 520.9% higher than VALE’s 4.79x.

In terms of trailing-12-month price-to-book, CLF’s 4.26x is significantly higher than VALE’s 2.79x.

So, VALE is the more affordable stock.

POWR Ratings

VALE has an A overall rating, which equates to Strong Buy in our proprietary POWR Ratings system. However, CLF has an overall rating of D which represents a Sell.

Both VALE and CLF have a Momentum Grade of B due to their impressive price gains over the past year. However, in terms of Quality Grade, VALE has been graded an A, which is consistent with its significantly higher-than-industry profitability ratios. In comparison, CLF has a Quality Grade of D because of its negative ROE and cash from operations values.

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