Sunday, December 6, 2009

Patience Will Be Rewarded

The patient, long term investor would rather be early to the party than late to it. The economy is struggling through the early stages of recovery. Looking out beyond the next quarter or even the next year, the reindustrialization of America will come. With this in mind, we are initiating coverage of Reliance Steel & Aluminum Company with a buy opinion. Our target price is $87.56.

For a detailed analysis of Reliance Steel and Aluminum, go to

· For 3Q09, Reliance reported diluted earnings of $41.8 million, or $0.57 per diluted share as compared to $152.5 million ($2.07/share) in 3Q08. Sales in 3Q09 were $1.24 billion, down from $2.57 billion in 3Q08.
· For the nine months ending September 30, 2009, net income amounted to $56.1 million ($0.76/share), compared with net income of $416.5 million ($5.65/share) for the same period in 2008.
· Reliance Steel and Aluminum (RS) Upgraded By UBS
· Reliance Steel & Aluminum Co. announced that on October 21, 2009, the Board of Directors declared a regular quarterly cash dividend of $0.10 per share of common stock. The dividend is payable on January 6, 2010 to shareholders of record December 4, 2009.

In spite of the above, we anticipate future growth of 38.85%. Our target price of $87.56 reflects a free cash flow multiple of 17.96X our estimate of $4.87 in free cash flow twelve months out.

Disclosure: The author has no position in Reliance Steet & Aluminum Company.

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