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SSAB (OM:SSAB A) Shares Sit 29% Above Fair Value On SEK 3.3b Expansion

Simply Wall St · 1d ago

SSAB (OM:SSAB A) kicked off construction of a new quenching line in Oxelösund, a SEK 3.3b project aimed at increasing capacity for high strength wear and protection steels.

Recent trading has been positive for SSAB, with the share price showing a 38.25% year to date return and a 71.00% total shareholder return over the past 12 months. This suggests building momentum as the market reacts to capacity expansion plans.

Compare SSAB's capacity expansion plans with other materials stocks that may be preparing for potential breakouts by reviewing our hand-picked 188 high quality undervalued stocks.

After a 71% one year total return and a SEK 3.3b capacity project now in motion, is SSAB still offering a favourable risk reward for new money, or are current holders mainly defending gains?

Most Popular Narrative: 29% Overvalued

SSAB last closed at SEK102, while the most followed narrative fair value from Simply Wall St sits at SEK79.17, so the crowd-sourced view leans toward the shares running ahead of that intrinsic estimate built on an 9% discount rate.

Building on the narrative below, SSAB now even stands to profit from the EU's recently announced protectionist measures against artificially cheep Chinese steel products, a long-standing demand of the industry. Thus, while SSAB bestrides the elsewhere most worrisome potential trade conflict, i.e. between the US and the EU due to its facilities on both sides of the Atlantic, the Swedes will also gain protection against Chinese competition, whether warranted or not. But there's one potential threat on the horizon not to overlook: the economic effects of the War on the Persian Gulf. Should the global economy cool dramatically due to persistently high energy prices over the course of the next few months, basis resources will be among the first to take the hit. Hence, I leave my valuation assumptions basically unchanged but for an increased discount rate, resulting in a fair value of around 80 SEK per share.

See why 64 investors see SSAB as 29% overvalued.

Result: Fair Value of SEK79.17 (OVERVALUED)

Still, that upbeat SSAB story depends heavily on trade protection remaining supportive and on global steel demand not being hit hard by weaker economic conditions.

Find out about the key risks to this SSAB narrative.

Next Steps

If that mix of risks and rewards around SSAB leaves you uncertain, move quickly from headline impressions to hard numbers by reviewing the 3 key rewards and 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.