CLEVELAND-CLIFFS INC. (CLF): what the price requires

The current priced-in claim for CLEVELAND-CLIFFS INC. (CLF) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/CLF

Headline

FieldValue
TickerCLF
CompanyCLEVELAND-CLIFFS INC.
Current price$9.68/sh

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed3.3%
Operating margin (mid-cycle)10.1%
Margin compression implied-6.8pp
Trailing margin (depressed year)-7.6%
Multiple paid7x mid-cycle operating income

The operating-margin requirement is derived from the framework's value band at year 5, a separately labeled basis from the headline growth/duration solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 7% sits below it).

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history-0.03σ
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and relative-multiple value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.00x2justifies
Earnings—0—
Relative0.19x1justifies
Growth—0—

Families that justify the price: Asset, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.2%); the inversion above states its own rate.

Per-Model Detail (n=3)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$0.00—noNegative/zero FCF — equity value floored at $0
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$49.740.19xyesP/S fallback (negative EPS): Sector P/S 1.5x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$10.210.95xyesReference only (book value floor): BV/sh $10.21, ROE negative
Two-Stage Excess ReturnAsset$9.191.05xyesReference only (book value with convergence): BV/sh $10.21, ROE converges to ke
Discounted Future Market CapGrowth$4.102.36xnoRev $18.9B, growth 2% (input: historical growth; tapered), Terminal P/S: 0.2x / 0.3x / 0.4x (bear / base = today's held flat / bull, cap 6x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$3.892.49xnoNormalized EBIT (5y avg op income, one-time charges added back) $0.88B × (1−21%) / WACC 6.2% → EPV (no growth)
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative$0.01968.00xyesEBITDA $0.08B × sector EV/EBITDA 8.0x (excluded from median)
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$49.740.19xnoRevenue $18.90B × sector P/S 1.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$8.1b
Net debt / NOPAT (after-tax)5.31x
Net debt / operating income (pre-tax)4.19x
Share count CAGR (dilution)1.7%
Burning cashyes

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 10.1%); the trailing year was depressed.

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

The one metric that decides Cleveland-Cliffs is its mid-cycle margin, estimated near 10%, because everything else flows from where you are in the steel cycle. Trailing results show an operating loss, but that is a cyclical trough reading, not the earning power of the business. Steel is a commodity that swings violently, and the way to value an integrated producer is on what it earns across a full cycle, not at the bottom. At a 10% mid-cycle operating margin on a revenue base running near $20 billion, Cleveland-Cliffs is a materially profitable business; the current loss is the cycle, not the franchise. The reverse-DCF, working off normalized economics, reads the price as below its floor and justified by relative multiples.

The cycle is turning the right way, and policy is helping. Q1 2026 revenue rose to $4.92 billion from $4.63 billion a year earlier, the adjusted loss of $0.40 beat estimates, and management guided to improving pricing and EBITDA in the second and third quarters with a return to positive free cash flow. The tailwind is tariffs: the company expects steel demand to grow as tariffs support domestic production (FY2025 10-K, accession 0000764065-26-000025), and as the largest flat-rolled steelmaker in North America and a leading supplier to the automotive industry, Cleveland-Cliffs is positioned to capture that protected domestic pricing. Its value-added work with automakers, including a 2025 production trial stamping its steel for a major automotive customer (FY2025 10-K, accession 0000764065-26-000025), shows the technical relationships that underpin its volume.

The asset value provides a reference under the price. The book-value floor sits at $10.21 per share against a $12.27 price (June 27, 2026), so a buyer is paying only a modest premium to tangible book for a vertically integrated steelmaker with iron-ore mining, steelmaking, and downstream finishing. If steel prices firm and the energy and cost spikes that hit Q1, including an $80 million one-time cold-weather energy impact, normalize, the operating leverage in an integrated producer is enormous: incremental tons drop a high share of revenue to EBITDA. A buyer at $12.27 is making a cyclical bet near book value on a domestic steel recovery that tariffs and an aging-infrastructure replacement cycle could drive.

Bear Case

The disconnect a holder must confront is qualitative and stark: this is a company losing money with a balance sheet that magnifies every downturn. The trailing operating income is negative, the company carries three distress signals, sustained net-income losses, negative retained earnings, and an Altman distress reading, and those flags exist for a reason. Steel is brutally cyclical and capital-intensive, and Cleveland-Cliffs layered a debt-funded acquisition strategy on top of that cyclicality. Net debt of about $8.1 billion against normalized operating income puts leverage near 4.3x, and at a cycle trough with negative current earnings, the interest bill is a fixed claim that the equity must service whether or not the mills are profitable.

The mid-cycle margin that anchors the bull case is an assumption, not a fact, and steel cycles can stay depressed longer than a levered balance sheet can comfortably wait. The company's own filing warns that if it cannot sell the same volume to other customers and markets, lower production leads to lower sales, shipments, pricing, and margins as competitors compete vigorously (FY2025 10-K, accession 0000764065-26-000025). Demand is tied heavily to automotive and construction, both rate- and economy-sensitive, and a downturn in either, or a reversal of the tariff support, would push the trough deeper. The Q1 results showed the fragility: an $80 million one-time energy spike and rising per-ton production costs from diesel, scrap, and outages, with management guiding to a $15 per ton cost increase before relief.

The valuation has no firm earnings anchor at this price. The standard projection methods are all shut off by the distress gate, the EV/EBITDA method collapses because EBITDA is near zero, and what remains is a book-value floor at $10.21, only modestly below the price. The relative method's $49.74 is a sales-multiple artifact that the distress gate explicitly excludes from consensus, so it is not a real anchor. Share count has been rising, adding dilution to the leverage. The bear read is that Cleveland-Cliffs is a highly levered, currently unprofitable cyclical priced near book, where the bull case depends on a steel-price and tariff recovery arriving before the debt load forces harder choices.

Valuation

Cleveland-Cliffs is valued as a distressed cyclical, and the model set reflects it: three distress signals, sustained losses, negative retained earnings, and an Altman distress reading, gate off the DCF, earnings, and sales-multiple methods as unreliable for a distressed firm. The EV/EBITDA method collapses to near zero because trailing EBITDA is minimal at the cycle trough. What remains is a book-value floor near $10.21 per share, modestly below the $12.27 price, and a relative-valuation reading of $49.74 that is a P/S artifact explicitly excluded from consensus because the company is loss-making.

The meaningful anchor is the normalized, mid-cycle view. The reverse-DCF runs on a normalized basis, with a mid-cycle margin near 10%, and reads the price as below its floor and justified by relative multiples, with a blended multiple around 8x on normalized earnings. That is the right frame for a commodity producer: not the trough loss the income statement shows, but the through-cycle earning power the assets can generate when steel prices are normal.

The honest synthesis is that Cleveland-Cliffs is a cyclical trading near book value, where the static methods cannot value it because it is currently unprofitable, and the normalized view depends on a steel-price recovery. The price sitting just above the $10.21 book floor says the market is paying a small premium to asset value for the option on a cyclical and tariff-driven upturn. The bet a buyer makes at $12.27 is that the mid-cycle margin assumption holds, that tariffs sustain domestic pricing, and that the roughly $8.1 billion debt load stays serviceable through the trough. If steel firms, the operating leverage is large and the normalized earnings justify a higher price. If the trough persists, the book floor and the leverage define a fragile downside.

Catalysts

The Q1 2026 report on April 20 was the most recent catalyst: revenue up to $4.92 billion, an adjusted loss of $0.40 that beat estimates, but only $95 million of adjusted EBITDA after an $80 million one-time cold-weather energy hit, and the stock fell on cost-pressure concerns. Management maintained full-year guidance of 16.5 to 17.0 million net tons of steel shipments and roughly $700 million of capital spending, and guided to improving pricing and a return to positive free cash flow in the second and third quarters. The next print tests whether that recovery materializes.

The forward watch items are the cyclical and policy drivers. First, steel prices, the single largest determinant of the outcome, where the tariff backdrop supporting domestic pricing is the key tailwind and any reversal is the key risk. Second, production costs, since Q1 flagged a roughly $15 per ton increase from diesel, scrap, and outages before expected third-quarter relief; cost normalization is needed for margins to recover. Third, free cash flow and debt, the central solvency question, where management's guided return to positive free cash flow is what would begin reducing the roughly $8.1 billion net-debt load. Fourth, automotive and construction demand, the end markets that drive volume and are sensitive to the economy and rates. Each quarter is a read on whether the cycle is turning up fast enough for a levered producer.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive CLF report on boothcheck