Nucor

Methodology

Nucor's steel earnings are highly cyclical with construction demand, manufacturing activity, and steel pricing, requiring normalization to mid-cycle profitability levels. The mini-mill model provides cost advantages but doesn't eliminate cycle exposure. Use average earnings across steel cycles rather than peak or trough figures to avoid misleading valuations.

Methodology

PEG analysis is challenging for Nucor given extreme earnings volatility from steel pricing cycles. During construction booms, low PEG ratios can be dangerously misleading as prices normalize. Focus on price-to-book value and return on capital through the cycle rather than earnings growth metrics for commodity steel producers.

Methodology

Nucor offers an attractive dividend with a variable component that adjusts based on profitability, providing meaningful yield during strong steel markets. The flexible dividend policy returns excess cash during profitable periods. PEGY looks compelling at cycle peaks but overstates sustainable returns given steel price volatility.