Weekly Issue #9
Commercial Metals (CMC) — $63.89 at Friday’s close
Commercial Metals makes the steel rebar inside concrete — highways, bridges, airports, buildings — and since December it has bought two precast-concrete businesses to turn itself into a construction-materials company. It has paid a dividend for 247 quarters in a row, it has been profitable in each of the last 11 fiscal years, and its stock costs 12 times its earnings over the last twelve months — about 14 once a one-time tax credit is taken out. Nucor and Steel Dynamics, two of the biggest US steelmakers, cost about 20 and 21.
Here’s why it’s priced that way. It borrowed $2 billion at 5.75% and 6% to pay for the change, and net debt went from $0.3 billion in August to $2.8 billion in May. This year Nucor is up 53% and Steel Dynamics 41%; Commercial Metals is down 8%. And its stock fell on the day of three of its last four earnings reports — and by 13% in the two sessions after the fourth.
It reports its full fiscal year on Thursday, October 15, four days after this letter. The box below says in advance what would count as a pass.
A steel company with a nearly 62-year dividend record borrowed $2 billion to buy its way into concrete. Thursday shows how it’s going.
What it’s turning into
Its Construction Solutions segment — precast concrete, pipe, soil stabilization — sold $394.6 million last quarter, double a year earlier, at a 24.7% EBITDA margin against 14.2% for the company overall. Management’s fiscal 2029 target is $1.65 to $1.8 billion of core EBITDA; last quarter’s pace is about $1.4 billion a year. Targets, not forecasts.
Commercial Metals (CMC) — $63.89 at the Oct 9 close, 25% off its 52-week high
| The check | Reading | Verdict |
|---|---|---|
| Price to earnings | 12.0× (13.6× at a normal tax rate) | ✓ Under Graham’s 15 either way |
| Price to book | 1.6× | ⚠ Just over Graham’s 1.5 — but P/E × P/B is 21.3, inside his 22.5 limit |
| Current ratio | 2.3 | ✓ Meets Graham’s 2 |
| Net debt to EBITDA | 2.5× | ⚠ Up from 0.3× in August; the company’s own adjusted figure is 2.1× |
| Return on invested capital | 8.5% | ⚠ The company’s target is 13% to 14.5% by fiscal 2029 |
| Piotroski F-Score | 6 / 9 | ✓ Decent |
| Dividend yield | 1.3% | 247 payments in a row — small, but steady |
Ratios from company statements and market data, not app figures (see CMC’s own page →). Price ratios at the Oct 9 close; earnings ratios on the last four reported quarters; balance sheet from May 31. “Normal tax rate” is my arithmetic: those quarters restated at 22%, since the last three were cut by a federal credit on its West Virginia mill. Analysts: 12 buy, 13 hold, 2 sell; target $82.
Why the app’s page reads differently
The app reads filed annual reports and shows which one it used. For Commercial Metals that is the year ended August 31, 2025 — before $2.5 billion of acquisitions and including a one-time $350 million legal charge — so its page reads a P/E near 85 for now. Last year the company filed its annual report the day it reported results; the page catches up once this year’s is in.
Thursday’s test — and what could break it
Core EBITDA of about $390 million or more. Last quarter was $353.6 million; the company said this one would be higher. Below $354 million is a clear fail.
Steel margins at $610 a ton or better. They slipped $13 last quarter as scrap costs outran prices — the squeeze behind June’s drop.
Debt starts coming down. Net debt was $2.84 billion in May, and a roughly $370 million antitrust judgment under appeal isn’t in that figure.
Earnings are a cycle plus a credit. Per-share earnings were $9.95 in fiscal 2022 and about $3 in fiscal 2025 before a $350 million legal charge. About 61 cents of the last twelve months’ earnings is a federal tax credit on a West Virginia mill that hasn’t opened.
Skin in the game
I don’t own Commercial Metals, and I won’t buy any until after this letter has gone out. The people who run it have bought and sold: over the past year the CEO and two directors bought about $854,000 of stock at $58 to $75 — $504,000 of it the CEO’s at $61.30 on July 10, his third purchase in three years — while two officers sold $2.4 million, mostly a former executive’s $2.0 million at $79.97 in February. Neither sale was under a pre-set trading plan.
Which account?
A 1.3% dividend makes US withholding tax a rounding error: 15% of $0.80 is 12 cents a share a year. It’s exempt in an RRSP, recoverable as a foreign tax credit in a non-registered account, and lost only in a TFSA. The bigger lever for a stock this volatile is where gains and losses land: capital gains are still 50% taxable, so at a 40% marginal rate a $1,000 gain costs about $200 non-registered and nothing in a TFSA — but a TFSA also throws away any loss, which a non-registered account can use.
The workfile
Everything above is the short version. The workfile has the price history, the earnings cycle, the debt and the lawsuit, the insider ledger on both sides, Graham’s eight tests, the steel peers, and the stocks considered instead. It’s in this week’s workfile →
Your turn 👇
Which stock should we run through the checks next? Hit reply with a ticker.
Send me your pick →Curtis Travis is a retired AACI appraiser (B.Comm) and founder of Travis Valuation. He owns shares of Lennar, Amazon, Walmart, Costco, TD, Scotiabank, Dick’s, Berkshire Hathaway and OMAB, all named in past issues — he does not own Commercial Metals. Scorecard, price history, statements, peer ratios and analyst targets are from market data as of the Oct 9, 2026 close — not figures the Travis Valuation app carries. Company facts (dividends, acquisitions, notes, tax credit, lawsuit, outlook, August targets) are from Commercial Metals’ own SEC filings; insider trades are from SEC Form 4s. Prices move. Informational only — not a recommendation, and not tax advice. Do your own diligence.