Stock Analysis on Net
Stock Analysis on Net

United States Steel Corp. (NYSE:X)

This company has been moved to the archive! The financial data has not been updated since July 28, 2023.

Present Value of Free Cash Flow to Equity (FCFE) 

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

United States Steel Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 24.25%
01 FCFE0 1,697
1 FCFE1 1,911 = 1,697 × (1 + 12.60%) 1,538
2 FCFE2 2,067 = 1,911 × (1 + 8.19%) 1,339
3 FCFE3 2,145 = 2,067 × (1 + 3.78%) 1,118
4 FCFE4 2,132 = 2,145 × (1 + -0.63%) 894
5 FCFE5 2,024 = 2,132 × (1 + -5.04%) 683
5 Terminal value (TV5) 6,561 = 2,024 × (1 + -5.04%) ÷ (24.25% – -5.04%) 2,215
Intrinsic value of United States Steel Corp. common stock 7,788
 
Intrinsic value of United States Steel Corp. common stock (per share) $34.93
Current share price $24.67

Based on: 10-K (reporting date: 2022-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.79%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of United States Steel Corp. common stock βX 2.16
 
Required rate of return on United States Steel Corp. common stock3 rX 24.25%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rX = RF + βX [E(RM) – RF]
= 4.79% + 2.16 [13.79% – 4.79%]
= 24.25%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

United States Steel Corp., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in millions)
Dividends on common stock 50 23 8 35 36
Net earnings (loss) attributable to United States Steel Corporation 2,524 4,174 (1,165) (630) 1,115
Net sales 21,065 20,275 9,741 12,937 14,178
Total assets 19,458 17,816 12,059 11,608 10,982
Total United States Steel Corporation stockholders’ equity 10,218 9,010 3,786 4,092 4,202
Financial Ratios
Retention rate1 0.98 0.99 — — 0.97
Profit margin2 11.98% 20.59% -11.96% -4.87% 7.86%
Asset turnover3 1.08 1.14 0.81 1.11 1.29
Financial leverage4 1.90 1.98 3.19 2.84 2.61
Averages
Retention rate 0.98
Profit margin 4.72%
Asset turnover 1.09
Financial leverage 2.50
 
FCFE growth rate (g)5 12.60%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

1 Retention rate = (Net earnings (loss) attributable to United States Steel Corporation – Dividends on common stock) ÷ Net earnings (loss) attributable to United States Steel Corporation
= (2,524 – 50) ÷ 2,524
= 0.98

2 Profit margin = 100 × Net earnings (loss) attributable to United States Steel Corporation ÷ Net sales
= 100 × 2,524 ÷ 21,065
= 11.98%

3 Asset turnover = Net sales ÷ Total assets
= 21,065 ÷ 19,458
= 1.08

4 Financial leverage = Total assets ÷ Total United States Steel Corporation stockholders’ equity
= 19,458 ÷ 10,218
= 1.90

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.98 × 4.72% × 1.09 × 2.50
= 12.60%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (5,501 × 24.25% – 1,697) ÷ (5,501 + 1,697)
= -5.04%

where:
Equity market value0 = current market value of United States Steel Corp. common stock (US$ in millions)
FCFE0 = the last year United States Steel Corp. free cash flow to equity (US$ in millions)
r = required rate of return on United States Steel Corp. common stock

FCFE growth rate (g) forecast

United States Steel Corp., H-model

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Year Value gt
1 g1 12.60%
2 g2 8.19%
3 g3 3.78%
4 g4 -0.63%
5 and thereafter g5 -5.04%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 12.60% + (-5.04% – 12.60%) × (2 – 1) ÷ (5 – 1)
= 8.19%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 12.60% + (-5.04% – 12.60%) × (3 – 1) ÷ (5 – 1)
= 3.78%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 12.60% + (-5.04% – 12.60%) × (4 – 1) ÷ (5 – 1)
= -0.63%