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kiddo09 (< 20)

Mechel: Potential 3 Bagger?



May 19, 2009 – Comments (4) | RELATED TICKERS: MTL

Mechel OAO (MTL) has been trading in the $50-range about a year ago. But the stock started to plunge after the controversy between its MD Igor Zyuzin and Vladimir Putin. Adding to its injuries are the fall in coal prices and the recent market recession. The last time I checked it is trading at $8.21 with a market capitalisation of $3.05B. This compared to its 52-week high of 58.60 and low of 2.56.

However I believe this will be a potential 3 bagger in the mid term. Let me explain:

Firstly, it's ratios apart from quick and current ratios are all above the industry's average. It has a PE ratio of 1.2 at its latest price compared with industry's average of 7.20 and EPS growth rate of 48.93 compared with 19.42; Sales growth of 32.77 versus 30.64. It's a great momentum play.

 Secondly using a very conservative approach, I calculated that it is worth about $21.46.

With the current general optimism that the recession has bottomed out, and with the expectations of coal, nickel, and iron ore prices rising, I expect Mechel to reach that price by early to mid 2010. 


Any opinions by other users are absolutely welcomed. Thanks for your time reading this post.


Kiddo, 17

4 Comments – Post Your Own

#1) On May 19, 2009 at 1:32 AM, awallejr (35.47) wrote:

I have bought some MTL in real life.  I also wrote puts to buy MTL at $5 (June puts).  I like MTL long term, more for its mining tho.  I wouldn't expect $50 anytime soon, but maybe 10-15.

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#2) On May 19, 2009 at 2:58 AM, Alex1453 (< 20) wrote:

This is where I've put my money too. I agree with you 100% Kiddo, but I think you are missing out on an important aspect of your argument: the value of the ruble and the rate of capital investment in Russia. No, they didn't have anything to do with the Zyuzin-Putin spat, which really caused a lot of damage to Mechel; however, the pulling of capital investment from Russia after the Georgia War and the value (or honestly, the lack thereof) of the ruble did a lot to exacerbate the fall of Mechel's stock price. So, if anything, it seems that, in this combination of a growth and value play, we're just now beginning to come back to a decent value (people have awoken from their stuper).

Mechel is kind of like a kid in those 1950's sitcoms where, after doing something bad, little Bobby got punished, then was forgiven and taken out for ice cream. Well....we got "punished," it seems now that all is being forgiven, and we can just sit back and wait for our ice cream.

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#3) On May 19, 2009 at 3:30 AM, mikejw (37.48) wrote:

Mechel OAO (MTL) might end up stuck in a valution range similar to Harvest Natural Resources (HNR) due to the Putin factor.  With HNR, the Chavez factor has kept the stock price in check as investors are not willing to push up the price of a stock that might lose business overnight based on the whims of a authoritarian govenrment. 

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#4) On May 19, 2009 at 12:30 PM, kiddo09 (< 20) wrote:

Thanks for pointing out the ruble issue Alex1453. And yes I put money into it too. And today it went up by 10%, making me about $1500. Hoorah!

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