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Nucor Corporation (NUE) — Dangerous Risk/Reward Rating for Ask Matt Readers

Thursday, July 7th, 2011

Here is a free copy of our report on Nucor for readers of Ask Matt.

The valuation of NUE’s stock implies the company will grow its after-tax cash flow (NOPAT) by nearly 20% compounded annually for 20 years. That is an expensive stock, especially when the company’s return on invested capital (ROIC) is so low and gets our worst rating.

For details on our analysis of the economic earnings of NUE and our stock rating system, see the free report available at the link above as well as Investment Strategy 101.

For the stocks we consider to be the best, see our Most Attractive Stocks newsletters. Note that these reports are free after 90 days: free report archive.

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  1. varadha says:

    Terrific, yet simple analysis. I’ve always been a fan of ROIC as a measure of capital efficiency and believe that no size/growth outperformance can replace the quest for efficiency.

    Sort of like a big gas guzzling v8 that needs ever increasing gallons of fuel to keep its engine running

  2. David says:

    But Angie’s $90 per user acquisition cost is going to go away. That’s what their approach probably is. How would their outlook be if that $90 cost dropped down to a total cost of $3 per user?

  3. David:

    That would be great, but cost per user acquisition is not something that’s very easy for a company to fix. ANGI can slash their marketing budget to the bone, but then they would stop acquiring new members. They would probably lose members in fact, as their membership renewal rate is at ~75% and declining. If they cut marketing expense by ~95% as you seem to be suggesting, ANGI might be able to eke out 1 year of slight profits, but they would start shedding members and losing money very quickly. ANGI’s only hope is to keep its marketing budget high and hope it can reach the scale and brand awareness to be able to sustain its business while scaling back marketing costs enough to turn a profit. The fact that ANGI’s revenue growth is slowing down even as its marketing costs keep increasing makes it very unlikely it will achieve that goal.

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