Still Time to Buy Cleveland-Cliffs Stock After 46% Rally?

When you see CLF, some investors may instinctively recall Cliffs Natural Resources. But these days its Cleveland-Cliffs (NYSE:CLF) and shares have been on fire. CLF stock is up almost 50% so far in 2018.

With that kind of rally, some investors are beginning to wonder if Cleveland-Cliffs is a name they should have on their radar or if it’s one they’ve already missed.

Just last week, CLF crushed both earnings and revenue expectations. Sales of $714 million grew more than 50% year over year (YoY) and beat analysts’ estimates by about 10%. Earnings of 76 cents per share came in way ahead of estimates of 52 cents per share.

In a press release, Chairman, President and CEO Lourenco Conclaves said:

“After almost four years of consistent execution of a well-designed and thoroughly implemented strategy, our company has become a very powerful cash-generating enterprise…The following quarters should be a continuation of this strong second quarter, with the added positive contribution of the usual favorable seasonality of warmer weather during the entire second half of the year. As a consequence, we expect to generate in 2018 a level of free cash flow that we have not seen in years.”

I added bold emphasis to highlight why last quarter wasn’t just a one-time wonder. JPMorgan analysts seem to agree, as they were quick to upgrade the stock after the report. They went from “neutral” to “overweight” and put a $15 price target on CLF stock. From current levels, that still implies more than 40% upside.

Valuing CLF Stock
Just because CLF stock is up significantly over the past 12 months, doesn’t necessarily mean it’s expensive. For the year, analysts now expect earnings per share of $1.78. That’s a more than fourfold increase from last year’s results and leaves CLF trading at just 5.9 times earnings.

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