Analyzing the selling opportunity for SCHN
Steel name Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is set to announce its fiscal first-quarter earnings results before the open on Thursday, Jan. 6, 2022. The company will also host a webcast conference call to discuss the results on the same day. Wall Street's analysts anticipate that SCHN's earnings will come in at $1.76 per share for this upcoming earnings report.
A look back at Schnitzer Steel Industries' last eight earnings reports shows three post-earnings drops, four next-day rises, and one instance in which SCHN was unchanged back in January of 2020. The stock has averaged a 1% swing the day after its report, regardless of direction, which is lower than the 5.4% swing the options pits are pricing in this time around.
Options traders have been bearish ahead of the report. This is per SCHN's 10-day put/call volume ratio of 1.62 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 82% of readings from the past year. This implies long puts are being picked up at a quicker-than-usual clip.
Schnitzer Steel stock saw a pullback in late-November, after losing steam just below its June 1, 10-year high of $59,34, at the $58 area. The pullback looks to have found support at the $46 region, though, which is also home to SCHN's March peak from this year, as well as its annual highs in 2012. Year-to-date, SCHN is up 62%.
From a fundamental perspective, Schnitzer Steel stock has an attractive price-earnings ratio of 9.14 and strong price-sales ratio of 0.52. SCHN also reported 61% annual growth in revenues and a $169 million increase in net income for fiscal 2021.
However, the rest of the steel company’s fundamentals are relatively weak. For example, Schnitzer Steel's balance sheet has only $27.82 million in cash and $209.54 million in total debt. In addition, SCHN has struggled to maintain consistent top and bottom line growth in recent years. The steel company experienced a 28% decline in revenues and an over $160 million decrease in net income between fiscal 2018 and fiscal 2020. Furthermore, Schnitzer Steel stock has a forward price-earnings ratio of 54.35, suggesting that SCHN will experience a significant decrease in earnings and indicating a much less attractive valuation.