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On Wednesday, Jefferies initiated coverage on BlueScope Steel (OTC:BLSFY) Limited (BSL:AU) (OTC: BLSFY), a steel manufacturer with a market capitalization of $5.65 billion, issuing a Buy rating and setting a price target of AUD24.60. The firm’s coverage, now led by analyst Ramoun Lazar, anticipates earnings growth for the steel manufacturer, primarily driven by improvements in its downstream operations and internal efficiency measures, rather than relying on significant increases in steel spreads in Asia or the U.S.
The new price target suggests a 20% potential upside from the stock’s last closing price, despite Jefferies’ earnings forecasts being more conservative than the market consensus. BlueScope Steel’s shares have recently underperformed, with a year-to-date return of 2.84%. According to InvestingPro analysis, the stock appears undervalued, trading at an attractive P/E ratio of 11.5x. For more insights on undervalued opportunities, visit our Most Undervalued Stocks list.
Lazar’s statement highlighted the rationale behind the optimistic outlook: "We transfer coverage of BSL (PT $24.60, BUY). Our earnings growth forecasts are driven by downstream improvement and self-help delivery, versus any major uplift in Asian or US steel spreads." This suggests that the firm’s positive stance is rooted in the company’s operational strategies and intrinsic potential rather than external market factors. InvestingPro data supports this view, showing a strong financial health score of 3.13 (rated as GREAT) and a conservative debt-to-equity ratio of 0.07.
The coverage transfer and subsequent Buy rating come at a time when BlueScope Steel’s stock appears to be an attractive investment according to Jefferies, with the potential for a significant rise in share value if the company meets the firm’s expectations for earnings growth.
Investors and market watchers will now be looking to see if BlueScope Steel can capitalize on the opportunities outlined by Jefferies and whether the stock will indeed realize the forecasted 20% upside to its share price.
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