Universal Stainless – overpriced

Nasdaq Universal Stainless & Alloy Products (USAP) manufactures and markets semi-finished and finished specialty steel products. This is a turnaround case. Over the past 11 years, there was no growth in its revenue. The cumulative profit for this period was at the break-even level.

The company faces challenges in operating above its break-even shipment levels and improving its Contribution. The valuation analysis suggests that USAP stock is not currently an attractive investment opportunity due to its historical performance and uncertain prospects for growth.

The market is pricing USAP as if it can consistently ship 65 % more than the past 2 years average shipment tonnage. Furthermore, the Contribution has to be consistently 5% higher than the past 2 years average.