Bailey Pemberton
3 min read
ArcelorMittal has delivered a strong multi year share price run, so the immediate question for anyone looking at the stock today is whether that move is backed up by the cash it can generate over time. With a Discounted Cash Flow (DCF) estimate available, the focus turns to how the current price lines up with the stream of cash flows investors expect the steel group to produce.
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Over the past 3 years the stock has gained 166.1%, which puts real weight on whether the market is now asking too much or too little of ArcelorMittal’s future cash generation.
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Recent developments, from the proposed sale of ArcelorMittal South Africa to the IDC to heavy investment in lower carbon French capacity and a cold shutdown in Ukraine, can reshape where and when the group’s cash flows show up.
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Prefer to judge ArcelorMittal on earnings? See what ArcelorMittal’s 24.8x P/E says about the price.
The issue now is whether ArcelorMittal’s recent share price, after that multi year advance and a cluster of business changes, is adequately supported by the cash flows implied in its intrinsic value estimate.
If you are considering ArcelorMittal following its 166.1% three year performance and the recent deal and capex news, it may be helpful to compare it with 192 high quality undervalued stocks
Is ArcelorMittal a Bargain on Cash Flow?
The Discounted Cash Flow (DCF) model values ArcelorMittal based on the cash it can return to shareholders over time. Latest twelve month free cash flow sits at about US$88 million, while the projections used in the DCF rise into the low US$4b range later in the forecast period, so the gap between current and assumed future cash generation is wide.
The DCF points to an estimated intrinsic value meaningfully above the current €53.30 share price. This indicates that the model relies on a recovering cash flow profile rather than a flat steel cycle. The planned €1.8b low carbon investments in France matter here because they help explain why forecasts build in higher future free cash flow despite near term noise from events such as the South Africa restructuring and the Ukraine cold shutdown. Find out what ArcelorMittal could be worth using our Discounted Cash Flow (DCF) estimate.
The ArcelorMittal Narrative: What Would Justify Today’s Price?
Simply Wall St Narratives pick up where this valuation puzzle leaves off by explaining which expectations for ArcelorMittal’s future growth, margins and earnings would need to hold for the shares to be worth materially more or materially less than today. Each narrative ties a fair value to a distinct storyline about ArcelorMittal’s possible catalysts and risks, so you can track over time which version of events is actually unfolding on the Community page.
