Although Goldman Sax has a $5 six month target on AKS, I added to my 1/4 of my target position yesterday at $5 per share.
The stock is way oversold. I think it will be a good opportunity with upside to $10 and downside to $2.50.
Warning: This is a highly speculative stock, need 5 year horizon.
Prior to market opening, AK Steel AKS:NYSE was cut To Sell From Neutral By Goldman Sachs and cut to hold from buy by Dahlamn Rose.
Goldman Sachs cut AK Steel Holding Corp (AKS, $5.11, -$0.69, -11.90%) to sell with a new $5 six-month price target, citing expectations for continued weak prices of flat steel, “no sign of a turnaround” in the lucrative electrical -eel end market and other pressures for the stock. “Halfway through 2012, it is becoming evident that this is shaping up to be a tough year for the steel sector, and 2H could get even tougher, especially for flat-rolled products,” the firm wrote.
The stock is now trading down over 70% from its 52-week high.
The Debt to equity ratio is 304% which leads one to speculate that the dividend may be at risk. AKS pays an annual dividend of $0.20 and, at its current price, yields 3.45%
AKS is one of the most highly leveraged companies in the Iron & Steel industry and has a Debt to Total Capital ratio of 75.24%.
Additionally, the percentage of debt used in its capital structure grew this year. The company could face trouble servicing its debt as both its Interest Coverage and Quick ratios show that neither operating profits nor current assets alone are great enough to satisfy interest obligations.
One bright spot is AKS seems very inexpensive with a Price to Sales ratio of 0.106, below the Iron & Steel industry median PS ratio of 0.29