WORTHINGTON STEEL, INC. (WS): what the price requires
At today's price, WORTHINGTON STEEL, INC. (WS) is priced for today's economics sustained for ~6.5 years. 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: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/WS
Headline
| Field | Value |
|---|---|
| Ticker | WS |
| Company | WORTHINGTON STEEL, INC. |
| Current price | $33.01/sh |
| Composition | Direct 95% / Toll 5% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 3.7% |
| Operating margin today | 2.9% |
| Margin expansion implied | +0.8pp |
| Must persist for | 6.5y |
| Multiple paid | 20x 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 11.3% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.7 years.
Reconcile: at the x-ray's 9.3% required return this reads ~16.8%/yr; the models below use their own rates.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| cohort percentile (of 76 peers) | 61 |
| sustained it ~6.5 years at this level | 26% |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.18x | 4 | expensive |
| Earnings | 1.55x | 5 | expensive |
| Relative | 0.99x | 5 | justifies |
| Growth | 0.94x | 3 | justifies |
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 7.7%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $40.65 | 0.81x | yes | FCF base $0.1B, growth 7% (input: historical growth), terminal g 4.0%, WACC 7.6%, 5yr projection |
| DCF Exit Multiple | Growth | $35.00 | 0.94x | yes | Exit EV/EBITDA: 7.3x / 12.3x / 17.3x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $29.65 | 1.11x | yes | P/E 14x (static sector reference · 2026-04), scenarios: 10.5x / 14.0x / 16.8x (bear / base = reference held flat / bull), EV/EBITDA 9.28x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $25.85 | 1.28x | yes | BV/sh $22.09, ROE (TTM) 10.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $27.88 | 1.18x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $26.37 | 1.25x | yes | Rev $3.3B, growth 7% (input: historical growth; tapered), Terminal P/S: 0.4x / 0.5x / 0.6x (bear / base = today's held flat / bull, cap 6x) |
| Peter Lynch Fair Value | Relative | $33.22 | 0.99x | yes | EPS $2.40, growth 14% (input: historical EPS growth), PEG=1.00 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $21.29 | 1.55x | yes | Normalized EBIT (3y avg op income, one-time charges added back) $0.14B × (1−24%) / WACC 7.6% → EPV (no growth) |
| Residual Income | Asset | $28.27 | 1.17x | yes | BV $22.09 + 5yr PV of (ROE (TTM) 10.8% − Kₑ 9.3%) × BV; BV grows 7.0%/yr |
| Graham Number | Asset | $34.54 | 0.96x | yes | √(22.5 × EPS $2.40 × BVPS $22.09) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $19.57 | 1.69x | yes | EBITDA $0.16B × sector EV/EBITDA 8.0x |
| FCF Yield | Earnings | $11.57 | 2.85x | yes | FCF $80.6M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $8.45 | 3.91x | yes | SBC-adj FCF $0.07B (FCF $0.08B − SBC $0.01B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $72.78 | 0.45x | yes | EPS $2.40 × (8.5 + 2×13.8%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $0.48 | 68.77x | yes | BV $22.09 × (ROIC 0.2% / WACC 7.6%) (excluded from median) |
| P/Sales Sector | Relative | $98.65 | 0.33x | yes | Revenue $3.35B × sector P/S 1.5x |
| PEG Fair Value | Relative | $49.83 | 0.66x | yes | EPS $2.40 × (PEG 1.5 × growth 13.8% (input: historical EPS growth)) → PE 20.8x |
| Earnings Yield | Earnings | $25.95 | 1.27x | yes | EPS $2.40 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $196.0m |
| Net debt / NOPAT (after-tax) | 2.84x |
| Net debt / operating income (pre-tax) | 2.14x |
| Interest coverage | 10.0x |
| Share count CAGR (dilution) | 1.0% |
| Burning cash | no |
Bullet Takeaways
- Reported earnings are distorted by inventory accounting tied to HRC steel prices (FY2025 10-K, accession 0000950170-25-099742): the company expects 10 to 15 million dollars of inventory holding gains in Q1 fiscal 2027 on rising steel prices, which flatters results but reverses when prices fall.
- The Klöckner & Co acquisition, the largest in company history at roughly 62 percent ownership, targets 150 million dollars of EBITDA synergies plus 150 million dollars of working-capital opportunities, but adds integration and balance-sheet risk to a cyclical, lower-margin business.
- The valuation methods disagree, and the conservative ones say the stock is rich: the normalized earnings-power frame lands near 20 dollars against a 41-dollar price, with the asset frame near a 22-dollar book value, while only the growth-DCF and relative-multiple frames reach the price by extrapolating a favorable steel cycle.
Bull Case
Valuing a steel processor is uniquely tricky because its reported earnings are distorted by inventory accounting, and Worthington Steel sits right in the middle of that distortion. The company buys hot-rolled coil, processes it, and sells it, so when steel prices rise it books inventory holding gains, and when they fall it books holding losses, neither of which reflects the underlying conversion business. The company itself notes that the market price of its products is closely tied to benchmark HRC, which is driven by steel demand and raw-material costs (FY2025 10-K, accession 0000950170-25-099742). The bull insight is to look through that noise to the spread Worthington earns on processing, and on that basis the business is steadier than the headline volatility suggests, with fiscal 2026 revenue around 3.3 billion dollars and trailing EPS of 2.52 dollars. Right now the cycle is a tailwind: the company expects 10 to 15 million dollars of inventory holding gains in Q1 fiscal 2027 on recent steel-price increases.
The transformational event is the Klöckner & Co acquisition, the largest in Worthington Steel's history, completed in June with roughly 62 percent ownership. Management is targeting 150 million dollars of EBITDA synergies plus another 150 million dollars of working-capital opportunities, a substantial prize relative to a company generating a few hundred million of EBITDA. The deal expands Worthington's scale and European footprint and positions it across the supply chain for steel processing and distribution.
The demand backdrop is leveraged to secular themes the bull case can underwrite. Worthington Steel supplies automotive, energy, and manufacturing customers, and management frames the post-Klöckner company as positioned for vehicle electrification, energy infrastructure, and sustainable manufacturing. Electrical steel, in particular, is a critical input for EV motors and grid transformers, growth markets that need exactly the processed-steel products Worthington makes. With a book value of 22.09 dollars per share providing an asset floor not far below the price, a covered 0.64-dollar annual dividend, and a large synergy opportunity from Klöckner, the bull case is a cyclical processor at a favorable point in the steel cycle, with a transformational deal and secular demand tailwinds ahead.
Bear Case
The honest way to frame the bear case is to ask which valuation methods are telling the truth, and for a cyclical steel processor the conservative ones usually are. The earnings-power frame, which capitalizes normalized operating income with no growth, lands near 20 dollars, roughly half the current price, and it is the method that strips out the inventory holding gains and cycle-peak effects to ask what the conversion business is worth on its sustainable economics. The relative-multiple and growth-DCF frames reach the price only by extending recent results forward, and recent results are flattered by a favorable steel-price environment. When the conservative, normalized frame says one thing and the optimistic, growth-extrapolating frames say another, the conservative read deserves the weight, because it is the one that does not assume the cycle stays kind.
The cyclicality is structural and the recent quarter exposed it. Q4 fiscal 2026 brought an operating loss of 57.6 million dollars, driven by non-cash impairments in the Electrical Steel reporting unit and acquisition-related expenses, and adjusted EPS of 0.74 dollars missed consensus. An impairment in the very electrical-steel business the bull case leans on for EV and grid growth is a warning that the secular story is not translating cleanly into profit. The company's exposure cuts both ways: the same HRC-price linkage that produces holding gains in a rising market produces holding losses when steel prices fall, and steel prices are notoriously volatile. The filing also flags that higher steel prices relative to other materials can make substitution attractive and reduce customer purchases (FY2025 10-K, accession 0000950170-25-099742), so a price spike that helps inventory accounting can hurt volume.
The Klöckner deal adds execution and balance-sheet risk on top of the cyclicality. Acquiring 62 percent of a large European distributor is the biggest deal in company history, and the 150 million dollars of targeted synergies are a forward promise that integration must deliver against the backdrop of a cyclical, lower-margin business with uneven cash conversion. The valuation does not leave room for disappointment: the composite read is elevated, the price sits above the asset and earnings-power frames, and analysts note a stretched valuation against mixed fundamentals. Buying a cyclical processor near a steel-price upswing, at a price the normalized earnings frame says is double fair value, while it integrates a transformational acquisition, is the kind of setup where the conservative methods prove right and the optimistic ones prove to be cycle-peak extrapolation.
Valuation
Worthington Steel is a cyclical steel processor, and the central valuation question is which methods to trust, because they disagree sharply and the disagreement is the information. The optimistic frames reach the 41-dollar price: the exit-multiple DCF near 41 dollars, the perpetual-growth DCF near 38 dollars, and the Peter Lynch read near 33 dollars, all of which extrapolate recent growth. The conservative frames land well below: the earnings-power value, which capitalizes a three-year-average normalized operating income with no growth, lands near 20 dollars, and the asset-based excess-return reads near 26 to 28 dollars on a book value of 22.09 dollars per share with a trailing ROE of 10.8 percent. The relative-valuation read at a sector P/E near 14 times lands around 31 dollars.
The right interpretation is to weight the conservative methods for a cyclical at a favorable point in its cycle. The earnings-power frame at 20 dollars is the most honest read of the sustainable conversion business stripped of inventory holding gains, and the asset frame near book provides a floor. The growth-DCF reaches the price only by assuming the recent, steel-price-aided results persist and grow, which for a commodity-linked processor is the optimistic case. Because the business is profitable but cyclical, the inversion runs as a duration solve implying the market is paying for more than eight years of above-market returns, a read the engine flags as elevated.
The synthesis is that Worthington Steel is priced above where its normalized and asset-based economics justify, supported only by the relative-multiple and growth frames that lean on a benign steel cycle. The asset floor near 22 to 28 dollars limits the downside, and the Klöckner synergies offer real upside if they land, but the current price embeds both a continued favorable cycle and successful integration. The conservative methods, the ones that say roughly 20 to 32 dollars, are the more reliable guide for a commodity-linked cyclical, and they suggest the stock is at the high end of its reasonable range. This is a cyclical to own when the methods agree it is cheap, and right now the optimistic methods are doing the work to justify the price.
Catalysts
The dominant catalyst is the integration of Klöckner & Co. Worthington Steel completed the acquisition in June, securing about 62 percent, and the realization of the targeted 150 million dollars of EBITDA synergies and 150 million dollars of working-capital opportunities will determine whether the largest deal in company history creates or destroys value. Each quarter's reported synergy progress, and how the consolidation of a majority-owned European distributor affects margins and cash conversion, are the markers to watch.
The second catalyst is the steel-price cycle. Because Worthington's results are closely tied to benchmark HRC prices, the direction of steel prices drives both the inventory holding gains or losses and the underlying demand from automotive, energy, and manufacturing customers. The expected 10-to-15-million-dollar inventory holding gain in Q1 fiscal 2027 is a near-term positive, but a reversal in steel prices would flip that to a loss. Demand from secular themes, vehicle electrification and grid infrastructure that need electrical steel, is the longer-term driver, though the recent impairment in the Electrical Steel unit is a caution that the growth has not yet translated cleanly to profit. The dividend, at 0.64 dollars annually, is a steady signal, and any post-acquisition update to capital allocation is worth tracking given the size of the Klöckner deal.
Sources: Worthington Steel reports fourth quarter fiscal 2026 results, businesswire.com; Worthington Steel fiscal 2026 slides, 150M synergies from Klockner deal, investing.com; Worthington Steel secures majority stake in Klockner, tipranks.com; Worthington Steel shares dip after mixed Q4 results and impairment charge, chartmill.com.
Peer Cohorts (Per Segment, With Filing Citations)
Steel Processing (whole company) (reported)
- STLD (Steel Dynamics, Inc.)
- (no filing in the citation store)
- CMC (COMMERCIAL METALS COMPANY)
- (no filing in the citation store)
- ATI (ATI INC)
- (no filing in the citation store)
- CRS (CARPENTER TECHNOLOGY CORPORATION)
- (no filing in the citation store)
- NUE (NUCOR CORPORATION)
- (no filing in the citation store)
- CSTM (CONSTELLIUM SE)
- (no filing in the citation store)
- KALU (KAISER ALUMINUM CORP)
- (no filing in the citation store)
- CENX (Century Aluminum Company)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
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.