COMMERCIAL METALS COMPANY (CMC): what the price requires

At today's price, COMMERCIAL METALS COMPANY (CMC) is priced for +13.6% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-13 · Source: https://boothcheck.com/report/CMC

Headline

FieldValue
TickerCMC
CompanyCOMMERCIAL METALS COMPANY
Current price$63.70/sh
CompositionRaw materials 17% / Steel products 42% / Downstream products 29% / Construction products 4% / Ground stabilization solutions 3% / Other 4%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin needed2.6%
Operating margin today5.5%
Margin compression implied-2.9pp
Implied growth13.6%
Multiple paid25x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.9pp.

Reconcile: at the x-ray's 9.3% required return this reads ~23.4%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
cohort percentile (of 76 peers)76
sustained it ~5 years at this level53%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and relative-multiple and growth-DCF value, while earnings-power lands below the price. 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
Asset1.17x4expensive
Earnings3.48x4expensive
Relative0.88x4justifies
Growth0.98x2justifies

Families that justify the price: Asset, Relative, Growth Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.3%); the inversion above states its own rate.

Per-Model Detail (n=14)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
DCF Exit MultipleGrowth$80.000.80xyesExit EV/EBITDA: 52.7x / 57.7x / 62.7x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$34.861.83xyesP/E 14x (sector median), scenarios: 10.5x / 14.0x / 16.8x (bear / base = sector held flat / bull), EV/EBITDA 17.6x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$48.801.31xyesBV/sh $39.37, ROE (TTM) 11.5%, ke 9.3%
Two-Stage Excess ReturnAsset$54.091.18xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$54.441.17xyesRev $8.4B, growth 9% (input: historical growth; tapered), Terminal P/S: 0.6x / 0.9x / 1.0x (bear / base = today's held flat / bull, cap 6x)
Peter Lynch Fair ValueRelative$53.641.19xyesEPS $4.47, growth 1% (input: historical EPS growth), PEG=11.31 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset$55.131.16xyesBV $39.37 + 5yr PV of (ROE (TTM) 11.5% − Kₑ 9.3%) × BV; BV grows 7.5%/yr
Graham NumberAsset$62.931.01xyes√(22.5 × EPS $4.47 × BVPS $39.37) — Graham's conservative floor
EV/EBITDA RelativeRelative$0.016370.00xyesEBITDA $0.18B × sector EV/EBITDA 8.0x (excluded from median)
FCF YieldEarnings$11.295.64xyesFCF $393.6M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$6.969.15xyesSBC-adj FCF $0.35B (FCF $0.39B − SBC $0.04B) capitalized at Kₑ
Ben Graham FormulaEarnings$144.230.44xyesEPS $4.47 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$112.410.57xyesRevenue $8.39B × sector P/S 1.5x
PEG Fair ValueRelative$167.630.38xyesEPS $4.47 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$48.321.32xyesEPS $4.47 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$3.1b
Net debt / NOPAT (after-tax)8.30x
Net debt / operating income (pre-tax)7.04x
Interest coverage10.2x
Share count CAGR (buyback)-2.3%
Burning cashno

Bullet Takeaways

Bull Case

Steel is a hard business to value, and the sector lens is where the bull case for Commercial Metals starts. A steel maker does not really sell steel; it sells the spread between what it charges for a finished product and what it pays for the scrap and energy that go into it, the metal margin. That spread, not the headline steel price, is the profit engine, and in the most recent quarter it moved the right way: average selling price rose about $21 a ton while scrap costs rose about $11, lifting the metal margin roughly $10 a ton sequentially. Commercial Metals runs electric-arc-furnace mills that melt recycled scrap, which is a structurally lower-cost and lower-emission way to make rebar than the integrated blast-furnace route, and that cost position is the durable part of the franchise.

What sets Commercial Metals apart from a pure mill is that it does not stop at the mill gate. The company fabricates the steel into the rebar and downstream products that go directly into construction projects, so it captures margin at two stages and stays close to the demand that actually consumes its output. Steel products are about 42% of the business and downstream fabrication another 29%, and that vertical integration smooths some of the volatility a standalone mill would feel. The Tensar ground-stabilization business, acquired to move the company further downstream into higher-margin engineered products, posted a strong quarter, and capacity expansions in products like geogrid and coated rebar are aimed at widening that higher-value mix.

The growth story is concrete steel demand from construction and infrastructure. Nonresidential construction has held up even through elevated interest rates, and federal infrastructure spending is a multi-year tailwind for rebar specifically. The company is investing into it, with roughly $600 million of capital spending in fiscal 2026 centered on a new West Virginia micro mill that adds low-cost capacity near demand. The balance sheet supports the build: interest is covered more than ten times over, the share count has been falling, and the company pays a dividend. A buyer at today's price is paying for a low-cost, vertically integrated steel maker investing into a demand cycle it is well positioned to serve, with the discipline to fund it without stress.

Bear Case

The moat in commodity steel is thinner than the integrated model suggests, and the place to see it erode is rebar, Commercial Metals' core product. Rebar is among the most import-exposed steel products there is, because it is relatively simple to make and ships economically, so foreign producers can flood a market when their home demand softens. Europe showed exactly this: the European steel group ran an adjusted EBITDA loss of about $1.4 million in the second quarter as elevated import flows, rushing in ahead of new carbon border rules, depressed rebar volumes and stripped away the fixed-cost leverage the mills need to be profitable. The same dynamic can pressure North American volumes if trade conditions shift, and a low-cost position does not protect a producer when a competitor is willing to dump product to clear inventory.

The economics are cyclical in a way the recent margin expansion can obscure. Steel makers live and die on the scrap-to-product spread, and that spread is volatile in both directions. Steel Dynamics, a direct electric-arc-furnace competitor, names the risk plainly in its own filing: "Volatility and major fluctuations in prices and availability of scrap metal, scrap substitutes and supplies, and our potential inability to pass higher costs on to our customers, may constrain operating levels and reduce profit margins". That is the whole cyclical thesis in one sentence. Commercial Metals competes, as Steel Dynamics also notes, on "price, quality, customer service, and proximity to the customer", which is to say on execution and location rather than on a defensible product advantage. When the cycle turns, the metal margin compresses for everyone at once.

Against that backdrop the valuation is not a bargain. The price sits at roughly 27 times trailing operating income and implies operating growth around 18% a year for five years, a pace only about 46% of comparable companies have sustained even five years. The most recent quarter underscored the risk: adjusted earnings came in below expectations and the stock fell. Net debt sits around seven times trailing operating income, which is fine at mid-cycle profitability but becomes heavy if a downturn compresses the metal margin. The bear case is not that Commercial Metals is a bad company; it is that a cyclical steel maker priced for sustained above-trend growth has little room for the cycle to disappoint.

Valuation

Start with what the price assumes, because for a cyclical it is the crux. At roughly 27 times trailing operating income, the price implies company-wide operating growth of about 18% a year for five years. That is a demanding bar for a steel maker, met by fewer than half of comparable companies over a five-year window, and it sits on top of a current operating margin around 5%. The market is paying for the up-cycle to extend and the downstream mix to keep improving, not for steady-state steel economics.

The method families split on whether that is warranted. The asset-based methods land closer, near or modestly below the price, because book value of about $39 a share and a double-digit return on equity give the equity real underpinning. The growth-dependent cash-flow methods are the ones that reach or exceed the price, and they get there by crediting the historical growth forward. The earnings-power frame, which capitalizes profit with no growth, sits far below, which is the signal that the price is paying for growth rather than for the current run rate. The honest read is a stock priced toward the optimistic end of its cyclical range: justified if construction and infrastructure demand sustain the metal margin, expensive if they do not.

Solvency keeps the downside contained without making the stock cheap. Net debt sits around seven times trailing operating income, which looks elevated but pairs with interest coverage above ten times, so the leverage is serviceable at current profitability; the risk is that the same ratio looks far worse if a downturn halves the metal margin. The share count has been shrinking and the dividend is modest, so capital return is real but not the centerpiece. The decisive variable is the spread between selling prices and scrap, the metal margin, because that single number drives the profitability every method is trying to value. The price has chosen to believe the spread holds and the downstream mix keeps climbing; that belief, not a balance-sheet worry, is what a buyer is underwriting.

Catalysts

The near-term catalyst is the metal margin and the volume trend behind it. The second quarter of fiscal 2026 showed the spread widening, with average selling prices up about $21 a ton against an $11 scrap increase, lifting core EBITDA to $297.5 million at a 14% margin, though GAAP earnings of $0.83 a share and adjusted earnings of $1.16 came in below the Street's expectation and the stock fell. The next print, with the Street looking for higher earnings, is the test of whether the margin expansion continues as construction season builds.

The structural catalyst is capacity and mix. Commercial Metals is spending roughly $600 million in fiscal 2026, centered on a new West Virginia micro mill that adds low-cost rebar capacity near eastern demand, and it is expanding higher-margin downstream products including coated rebar and Tensar geogrid. Each step deeper into engineered, downstream products is a step away from pure commodity exposure, and the ramp of the new mill is the multi-year volume catalyst.

The external catalysts cut both ways. North American steel EBITDA is guided to rise modestly against $15 to $20 million of planned maintenance costs, while the European business is fighting import pressure ahead of carbon border rules that, once enforced, could relieve some of it. Analyst sentiment has turned more constructive: targets cluster in the $66 to $92 range with a consensus near $84.50, and UBS upgraded the stock to Buy with a target of $89. The swing factor remains the durability of nonresidential construction and infrastructure demand, which is what converts the new capacity into the growth the price already assumes.

Peer Cohorts (Per Segment, With Filing Citations)

North America Steel Group (reported)

Emerging Businesses Group (reported)

Europe Steel Group (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.

Sources

Q2 FY2026 results · company FY2026 guidance and segment commentary · company guidance and Q2 commentary · analyst notes, 2026

View the full interactive CMC report on boothcheck