Eye on Russel Metals Inc with its long history of healthy growth
25.02.2015 • About Russel Metals Inc (
$RUS) • By InTwits
Pay attention to Russel Metals Inc as a growth stock. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.
Growth story
Russel Metals Inc showed fast growth in the last financial year. The company's revenue surged on 21.4% in FY2014. The growth also happened in EBITDA of 40.2% for the same period.
If we look for the longer period Russel Metals Inc showed fast revenue growth of 12.8% from 2011 to 2014 annually. EBITDA surged on 4.45% from 2011 to 2014 annually.
Russel Metals Inc ($RUS) financials for the last 5 years
| mln. CAD | 2010 | 2011 | 2012 | 2013 | 2014 |
|---|
| Revenue | 2,178 | 2,693 | 3,000 | 3,188 | 3,869 |
|---|
| Revenue growth, % | | 23.7% | 11.4% | 6.3% | 21.4% |
|---|
| Gross margin, % | 19.0% | 19.5% | 17.4% | 17.7% | 18.2% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 146 | 221 | 201 | 180 | 252 |
|---|
| EBITDA growth, % | | 51.7% | -9.3% | -10.4% | 40.2% |
|---|
| EBITDA margin, % | 6.69% | 8.21% | 6.68% | 5.63% | 6.51% |
|---|
| Net Income | 57 | 118 | 98 | 83 | 124 |
|---|
| Net Income margin, % | 2.63% | 4.39% | 3.26% | 2.61% | 3.19% |
|---|
| |
| CAPEX | 12 | 18 | 34 | 27 | 48 |
|---|
| CAPEX/Revenue, % | 0.533% | 0.672% | 1.12% | 0.853% | 1.25% |
|---|
| Debt | 320 | 298 | 470 | 458 | 485 |
|---|
| Cash | 324 | 271 | 115 | 116 | 53 |
|---|
| Net Debt/EBITDA | -0.0x | 0.1x | 1.8x | 1.9x | 1.7x |
|---|
| |
| ROIC, % | 10.7% | 17.6% | 14.3% | 10.9% | 15.3% |
|---|
| ROE, % | 7.3% | 14.9% | 11.9% | 9.7% | 13.4% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. The company's EBITDA margin surged on 0.900 pp from 5.60% to 6.50% in 2014. In the last 3 years Russel Metals Inc's EBITDA margin dropped on 1.70 pp from 8.20% in 2011 to 6.50% in 2014.
Russel Metals Inc shows attractive ROIC at 15.3% for the last 12 months which assumes stable development model. Three years ago it was a bit higher at 17.6%. For the last three years the average ROIC was 13.5%.
The company showed fast Net Income margin growth of 0.600 pp from 2.60% to 3.20% in 2014. If we look for the longer period the company's Net Income margin dropped on 1.20 pp from 4.40% in 2011 to 3.20% in 2014.
Russel Metals Inc operates at ROE of 13.4%. It's average level of ROE for the last three years was 11.7%.
Capital expenditures (CAPEX)
The company's CAPEX/Revenue was 1.25% in FY2014. Russel Metals Inc showed fast CAPEX/Revenue growth of 0.574 pp from 0.672% in 2011 to 1.25% in 2014. For the last three years the average CAPEX/Revenue was 1.07%.
Leverage (Debt)
Having such a fast growth profile the company keeps medium debt level at 1.7x Net Debt/EBITDA. In the longer period leverage surged on 1.59x from 0.12x in 2011 to 1.71x in 2014.
Valuation vs. comparable companies
The company trades at 7.8x EV/EBITDA which is 51.9% lower than 16.3x Basic Materials industry avearge calculated based on 1498 companies. The company trades at 12.5x P/E which is 25.1% lower than 16.7x Basic Materials industry avearge calculated based on 22 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 9.7x EV/(EBITDA-CAPEX) which is not surprisingly 419% higher than 1.9x Basic Materials industry avearge calculated based on 18 companies.
Management team
Brian R Hedges runs Russel Metals Inc as a CEO. Brian R Hedges has already spent 5.7 years as a CEO of the company.
Peers in Basic Materials
Below we provide Russel Metals Inc benchmarking against other companies in Basic Materials industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Turquoise Hill Resources Ltd ($TRQ) | | | | -34.0% | 3,268.9% |
| ADF Group Inc ($DRX) | | -15.9% | -12.4% | -14.5% | 124.6% |
| Dominion Diamond Corp ($DDC) | | 51.1% | -53.5% | 19.1% | 117.7% |
| Capstone Mining Corp ($CS) | | 19.6% | -6.8% | 8.7% | 97.6% |
| Rockwell Diamonds Inc ($RDI) | | 42.8% | -19.5% | -5.3% | 39.4% |
| |
|---|
| Median (55 companies) | | 27.9% | 9.1% | -2.3% | -1.5% |
|---|
| Russel Metals Inc ($RUS) | | 23.7% | 11.4% | 6.3% | 21.4% |
Top companies by Gross margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Royal Gold Inc ($RGL) | 60.6% | 68.9% | 71.5% | 70.6% | 57.6% |
| Barkerville Gold Mines Ltd ($BGM) | | 23.6% | 31.4% | 42.0% | 48.1% |
| Agnico Eagle Mines Ltd ($AEM) | 52.4% | 51.9% | 53.2% | 47.1% | 47.0% |
| Banro Corp ($BAA) | | | 48.1% | 39.8% | 44.9% |
| Silvercorp Metals Inc ($SVM) | 74.0% | 75.0% | 74.3% | 59.8% | 44.7% |
| |
|---|
| Median (56 companies) | 25.4% | 25.6% | 31.9% | 23.6% | 18.0% |
|---|
| Russel Metals Inc ($RUS) | 19.0% | 19.5% | 17.4% | 17.7% | 18.2% |
Top companies by EBITDA margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Royal Gold Inc ($RGL) | 69.4% | 86.1% | 88.2% | 88.6% | 84.4% |
| Alacer Gold Corp ($ASR) | | 46.1% | 67.1% | 57.6% | 50.5% |
| Potash Corp of Saskatchewan Inc ($POT) | 46.6% | 55.0% | 45.4% | 44.9% | 42.9% |
| Sierra Metals Inc ($SMT) | -1.9% | 38.7% | 46.1% | 36.5% | 41.1% |
| Agnico Eagle Mines Ltd ($AEM) | 46.4% | -25.1% | 41.1% | 35.5% | 37.0% |
| |
|---|
| Median (57 companies) | 21.4% | 19.8% | 18.2% | 16.3% | 15.3% |
|---|
| Russel Metals Inc ($RUS) | 6.7% | 8.2% | 6.7% | 5.6% | 6.5% |
Top companies by CAPEX/Revenue, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Barkerville Gold Mines Ltd ($BGM) | | 123.7% | 38.5% | 49.9% | 7,166.9% |
| Metanor Resources Inc ($MTO) | | | | | 72.4% |
| Silvercorp Metals Inc ($SVM) | 25.0% | 21.4% | 29.7% | 50.2% | 69.3% |
| Monument Mining Ltd ($MMY) | | 13.0% | 119.7% | 57.5% | 62.6% |
| Banro Corp ($BAA) | | | 327.5% | 163.1% | 58.6% |
| |
|---|
| Median (58 companies) | 19.7% | 21.9% | 22.3% | 22.2% | 15.7% |
|---|
| Russel Metals Inc ($RUS) | 0.5% | 0.7% | 1.1% | 0.9% | 1.2% |
Top companies by ROIC, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Canfor Pulp Products Inc ($CFX) | | 103.5% | 4.9% | 13.2% | 21.3% |
| Methanex Corp ($MX) | 5.9% | 12.3% | -2.1% | 15.7% | 19.3% |
| Canfor Corp ($CFP) | 9.0% | 0.7% | 4.2% | 17.6% | 15.8% |
| Western Forest Products Inc ($WEF) | 13.0% | 7.5% | 9.0% | 25.1% | 15.7% |
| Potash Corp of Saskatchewan Inc ($POT) | 21.2% | 32.6% | 20.9% | 16.8% | 15.2% |
| |
|---|
| Median (61 companies) | 2.2% | 7.0% | 5.7% | 3.0% | 0.9% |
|---|
| Russel Metals Inc ($RUS) | 10.7% | 17.6% | 14.3% | 10.9% | 15.3% |
Top companies by Net Debt / EBITDA
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| VMS Ventures Inc ($VMS) | | | | | 86.7x |
| Katanga Mining Ltd ($KAT) | 0.5x | 0.4x | 19.4x | 3.3x | 18.8x |
| Catalyst Paper Corp ($CYT) | | | 6.8x | 6.2x | 6.6x |
| Canexus Corp ($CUS) | | | 3.0x | 5.5x | 5.6x |
| Banro Corp ($BAA) | | | 21.2x | 5.7x | 5.1x |
| |
|---|
| Median (42 companies) | 0.5x | 0.5x | 0.7x | 0.9x | 1.2x |
|---|
| Russel Metals Inc ($RUS) | -0.0x | 0.1x | 1.8x | 1.9x | 1.7x |
