Friedman Industries Inc (FRD) stock analysis

P/E below its 5-year median

Friedman Industries's P/E of 6.6 is below its own 5-year median of 8.5.

P/E below the industry

Friedman Industries's P/E of 6.6 is below the Steel Works, Blast Furnaces, and Rolling and Finishing Mills median of 17.3.

EV/EBITDA below its 5-year median

Friedman Industries's EV/EBITDA of 3.5 is below its 5-year median of 5.8.

P/B below the industry

Friedman Industries's price-to-book of 1.51 is below the Steel Works, Blast Furnaces, and Rolling and Finishing Mills median of 1.70.

Trading below fair value

The share price of $37.68 is below our fair value estimate of $82.24.

Margin of safety over 20%

The price is 54.2% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 5.7% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew -1.7% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 255% over the last twelve months, against a 5-year average of 11.3% a year.

Growing faster than the industry

Revenue grew 73.7% over the last twelve months; the Steel Works, Blast Furnaces, and Rolling and Finishing Mills median is 9.8%.

Company guidance

No outlook found in earnings releases from the last twelve months.

Gross margin improving

Gross margin was 8.3% over the last twelve months, against -39.9% a year earlier.

Return on equity under 15%

Return on equity was 25.5% over the last twelve months and averaged 14.8% over five years; we look for 15% on both.

Return on capital over 10%

Return on invested capital was 34.7%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Friedman Industries's return on equity of 25.5% is above the Steel Works, Blast Furnaces, and Rolling and Finishing Mills median of 3.6%.

Earnings grew over 5 years

Net income grew 11.3% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 4.6% over the last twelve months, against a 5-year average of 3.3%.

Net margin above the industry

Friedman Industries's net margin of 4.6% is above the Steel Works, Blast Furnaces, and Rolling and Finishing Mills median of 4.0%.

Low debt

Debt is 1.9% of shareholders' equity, under the 40% we consider low.

Debt trend

Needs a balance sheet from five years ago with positive equity.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 174% of total debt.

Interest well covered

Operating income covers interest expense 14.1 times.

Short-term assets cover short-term debts

Current assets are 2.68 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 4.40; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Friedman Industries paid dividends worth 0.4% of the share price over the last twelve months.

Yield below Treasuries

The 0.4% yield is below the 4.7% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Friedman Industries yields 0.4%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 5 fiscal years.

Covered by earnings

Dividends take 2.8% of net income.

Cash-flow cover

Needs dividends paid and free cash flow.