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Investing.com -- JP Morgan initiated coverage of Reliance Steel & Aluminum with an Overweight rating and a price target of $350, saying the metals distributor’s steady growth, diversified business model, and resilience in uncertain markets are underappreciated by investors.
“In the current macro environment, challenged by trade/rate uncertainty, we feel the company’s resilient through-cycle margin profile, supported by strong diversification, a market-leading position (~15% share) and a track record of steady growth, is underappreciated and positions the company well to capture further upside,” analysts wrote.
The target implies about 17% potential upside from current levels.
JP Morgan said Reliance’s decentralized operating model, focus on value-added processing, and wide geographic reach limit earnings volatility compared with steel mills.
It noted that the company’s largest customer accounts for less than 1% of sales and more than 95% of orders come from repeat customers.
“Local intelligence also allows regional teams to make timely decisions, driving just-in-time delivery and higher inventory turnover, which limit working capital risk,” the bank said.
Since its 1994 IPO, Reliance has acquired 76 businesses, benefiting from what JP Morgan called a fragmented market where larger mills are unlikely to compete directly.
Analysts highlighted management’s “smart, profitable growth” initiative and said opportunities remain in both organic expansion and M&A. “We also see opportunities for organic growth, likely focused on value-add processing, from improved through-cycle cash generation amid structurally higher S232 metals pricing,” they wrote.
The bank valued Reliance at 11 times projected 2027 EBITDA, a premium to its recent average, arguing the stock should trade more in line with industrial distributors than steel mills.
“We feel the premium is warranted, and that shares should trade more in-line with industrial distributors rather than mills,” JP Morgan said.