Commercial Metals Company
CMC
$64.50
-3.87%
Commercial Metals Company (CMC) is a vertically integrated manufacturer and supplier of early-stage construction materials, producing steel reinforcing bars, merchant bar, wire rod, concrete pipes, precast products, and ground stabilization solutions for infrastructure, commercial, and residential projects across the United States, Europe, and Asia. As one of the largest domestic rebar producers and a leading scrap-based electric-arc-furnace (EAF) steelmaker, CMC occupies a distinct position as a low-cost, recycling-intensive operator with downstream fabrication and construction services that differentiate it from commodity-only steel peers. The current investor narrative centers on a sharp cyclical earnings recovery — Q3 FY2026 revenue grew 22.9% year-over-year to $2.48 billion with EPS of $1.56, a dramatic swing from the prior-year loss — driven by improving construction demand, higher steel prices, and the integration of a major acquired downstream asset. Debate now hinges on whether this earnings inflection is sustainable into FY2027, particularly given the stock's recent underperformance versus the S&P 500 and the market's skepticism about peak-cycle margins in a tariff-influenced steel pricing environment.…
CMC
Commercial Metals Company
$64.50
Investment Opinion: Should I buy CMC Today?
Rating: Buy. The core thesis is that CMC is in the early-to-mid innings of a cyclical earnings recovery, with forward EPS of $5.69 implying a forward PE of just 9.2x, well below the sector average and the stock's historical range. The analyst consensus is 'buy' with an average target of $81.18, implying 20.9% upside, and even the low target of $75.00 suggests 11.7% upside. The recent selloff appears overdone given the accelerating revenue growth and margin expansion.
Supporting evidence: Revenue grew 22.9% YoY in Q3 FY2026 to $2.48 billion, with sequential gains over four quarters. Gross margin expanded to 18.33% from 14.85% a year ago, and operating margin reached 9.38%. Free cash flow TTM is $405 million, and the balance sheet is conservative with debt-to-equity of 0.32 and a current ratio of 2.78. The PS ratio of 0.84x is a discount to the sector's 1.0-1.5x range, and the forward PE of 9.2x is below the typical 10-14x for integrated steel producers. The implied upside to the consensus target is 20.9%, and the short ratio of 5.48 suggests potential for a squeeze.
Risks and conditions: The biggest risks are a reversal in steel prices, a slowdown in construction demand, and the elevated dividend payout ratio of 96.2%. The rating would upgrade to a Strong Buy if forward PE compresses below 8x or if Q4 earnings show continued margin expansion above 19%. It would downgrade to Hold if revenue growth decelerates below 10% or if gross margins fall below 16%. The stock appears undervalued relative to its history and peers, trading at a discount on forward earnings and PS, but the market is pricing in peak-cycle skepticism. This is an objective, data-driven assessment, not personalized financial advice.
Sign up to view all
CMC 12-Month Price Forecast
CMC presents a compelling risk/reward for investors willing to tolerate cyclicality and high beta. The earnings recovery is well underway, with Q3 FY2026 EPS of $1.56 and revenue up 22.9% YoY, yet the stock trades at a forward PE of just 9.2x—a discount to peers and its own history. The analyst consensus is bullish, with a $81.18 average target implying 20.9% upside, and the recent selloff appears overdone given the fundamental momentum. However, the high beta of 1.52 and the 96.2% dividend payout ratio are concerns, and the market's skepticism about peak-cycle margins is a key overhang. I would upgrade to high confidence if Q4 earnings show continued margin expansion above 19% and revenue growth above 20%, and downgrade to neutral if gross margins fall below 16% or if steel prices weaken significantly.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Commercial Metals Company's 12-month outlook, with a consensus price target around $80.73 and implied upside of +25.2% versus the current price.
Average Target
$80.73
0 analysts
Implied Upside
+25.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$75 - $88
Analyst target range
Coverage is solid with 11 analysts, and the consensus is bullish. The recommendation is "buy" with a recommendation mean of 1.92 (where 1.0 is a strong buy and 3.0 is a hold), and the average target price is $81.18. Against the current price of $67.17, that implies upside of approximately 20.9% to the consensus target. The consensus leans clearly bullish, supported by recent institutional actions: UBS upgraded to Buy from Neutral on May 14, 2026, and B of A Securities and Citigroup both maintained Buy ratings in early July 2026, though Wells Fargo downgraded to Equal Weight from Overweight on June 4, 2026, introducing a note of caution.
The target range spans $75.00 to $88.00, a spread of $13.00, or roughly 17% of the midpoint — a moderately wide range that signals meaningful uncertainty about the pace of the earnings recovery. The high target of $88.00 implies roughly 31% upside and would require the stock to surpass its 52-week high of $84.87, assuming multiple expansion toward 15x forward earnings or a higher-than-consensus EPS outcome (the high EPS estimate is $6.03 versus the $5.69 average). The low target of $75.00 still implies 11.7% upside and likely assumes the recovery proceeds but at a more modest pace, with EPS near the low estimate of $5.38 and a forward multiple of roughly 14x. The fact that even the low target sits above the current price is a strong signal that the analyst community sees the recent selloff as overdone. However, the wide spread and the mixed rating actions (one downgrade, one upgrade, several reiterations) suggest conviction is not uniform, and the 5.48 short ratio indicates a meaningful contingent of investors betting against the recovery thesis.
Bulls vs Bears: CMC Investment Factors
The bull case currently has stronger evidence: the earnings inflection is dramatic and accelerating, forward valuation is undemanding at 9.2x, and analyst consensus implies 21% upside. However, the bear case is not without merit—the stock's recent underperformance and high beta suggest the market is pricing in peak-cycle skepticism. The single most important tension is whether the Q3 FY2026 margin expansion (gross margin 18.33%) is sustainable into FY2027 or represents a cyclical peak. If margins hold, the forward PE of 9.2x is too low; if they revert, the stock could retest its 52-week low of $53.08.
Bullish
- Earnings inflection is sharp and accelerating: Q3 FY2026 EPS of $1.56 swung from a prior-year loss of $0.74, while revenue grew 22.9% YoY to $2.48 billion. The sequential revenue progression from $2.12B to $2.13B to $2.48B shows accelerating momentum, not a one-off spike.
- Forward valuation is deeply discounted: Forward PE of 9.2x is well below the steel sector's typical 10-14x range, and PS of 0.84x is a discount to the sector's 1.0-1.5x. The market is pricing in recovery but not euphoria, leaving room for multiple expansion.
- Analyst consensus sees 21% upside: With 11 analysts and a 'buy' consensus (mean 1.92), the average target of $81.18 implies 20.9% upside from $67.17. Even the low target of $75.00 sits 11.7% above the current price, suggesting the selloff is overdone.
- Balance sheet is conservative and liquid: Debt-to-equity of 0.32 and a current ratio of 2.78 provide ample financial flexibility. Trailing free cash flow of $405 million and Q3 FCF of $76.4 million demonstrate the business generates cash even through the cycle.
Bearish
- Recent momentum is sharply negative: The stock is down 7.15% over 1 month and 13.62% over 3 months, underperforming SPY by 6.09 and 16.66 percentage points respectively. This deceleration pattern suggests the market is skeptical of the recovery's durability.
- Trailing profitability remains weak: Trailing net margin is just 1.09% and ROE is 2.02%, dragged by loss-making quarters. The trailing PE of 76.9x is meaningless but highlights how far earnings fell; the recovery must be sustained to justify the forward multiple.
- Dividend payout ratio is stretched: The payout ratio of 96.2% leaves little room for error if earnings disappoint. While the 1.25% yield appears covered by the current run-rate, any downturn could pressure the dividend.
- High beta amplifies downside: Beta of 1.52 means CMC is 52% more volatile than the S&P 500. In a market downturn, the stock could fall 1.5x the market's decline, and the 29.96% max drawdown over the past year underscores this risk.
CMC Technical Analysis
CMC is in a choppy, range-bound consolidation phase rather than a clean trend. The stock is up 13.33% over the past year but sits at $67.17, which is only 42.7% of its 52-week range (52-week low of $53.08, high of $84.87) — meaning it is trading in the lower-middle portion of its annual band despite the positive 1-year return. That positioning signals a stock that has given back a substantial portion of prior gains and lacks the momentum characteristic of names near 52-week highs; it is neither an overextended momentum play nor a deep-value falling knife, but rather a market that has yet to resolve its direction. The 29.96% maximum drawdown over the period underscores how violently the stock has swung within this range.
Short-term momentum is clearly negative and diverging from the longer-term trend. The stock is down 7.15% over the past month and 13.62% over the past three months, even as the 1-year change remains positive at 13.33% — a classic deceleration pattern where recent selling pressure is eroding the annual gain. Relative strength confirms the weakness: CMC has underperformed SPY by 6.09 percentage points over 1 month and a striking 16.66 percentage points over 3 months, while SPY itself gained 3.04% over that 3-month window. The 6-month change of +10.01% versus the 3-month change of -13.62% shows the stock peaked around mid-year (near $77-78 in June) and has been in a corrective downtrend since, with the recent bounce from the August 20 low of $65.28 to $67.17 offering only tentative stabilization.
Key technical levels are well defined. Support rests at the 52-week low of $53.08, with an intermediate shelf around the August 20 close of $65.28 that has so far held on retests; resistance sits at the 52-week high of $84.87, with a nearer ceiling around the June highs of $77.75. A breakout above $77-78 would signal a resumption of the uptrend and likely target the $84.87 high, while a breakdown below $65 would open the door to a retest of the $53.08 low and confirm the corrective trend. With a beta of 1.52, CMC is roughly 52% more volatile than the S&P 500, meaning position sizing should be scaled down accordingly — a 1.5 beta amplifies both the upside and downside of any market move, and the 5.48 short ratio (days-to-cover) suggests meaningful bearish positioning that could fuel a squeeze on any positive catalyst.
Beta
1.52
1.52x market volatility
Max Drawdown
-30.0%
Largest decline past year
52-Week Range
$53-$85
Price range past year
Annual Return
+8.1%
Cumulative gain past year
| Period | CMC Return | S&P 500 |
|---|---|---|
| 1m | -5.4% | -1.0% |
| 3m | -10.9% | +2.0% |
| 6m | +7.2% | +17.4% |
| 1y | +8.1% | +15.0% |
| ytd | -10.2% | +11.7% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
CMC Fundamental Analysis
CMC's revenue trajectory has inflected sharply upward. Q3 FY2026 (quarter ended May 31, 2026) revenue reached $2.483 billion, up 22.93% year-over-year from $2.020 billion in Q3 FY2025, and up sequentially from $2.132 billion in Q2 FY2026 and $2.120 billion in Q1 FY2026. The multi-quarter trend shows a clear acceleration: revenue grew from $1.754 billion in Q2 FY2025 to $2.020 billion in Q3 FY2025, then stepped up to $2.120 billion, $2.132 billion, and now $2.483 billion — a string of sequential gains culminating in the strongest print of the cycle. Segment data shows Steel Products leading at $951 million, followed by Downstream Products at $646 million and Raw Material Products at $461 million, indicating the core steel and fabrication businesses are the primary growth engines. This accelerating top-line momentum, if sustained, supports the bull case that CMC is in the early-to-mid innings of an earnings recovery rather than a late-cycle peak.
Profitability has improved dramatically but remains thin in absolute terms. Q3 FY2026 net income was $173.0 million (net margin of 6.97%) versus a net loss of $175.7 million in Q1 FY2025, a swing of nearly $349 million. Gross margin in Q3 FY2026 was 18.33%, up from 14.85% in Q3 FY2025 and 12.51% in Q2 FY2025, while operating margin reached 9.38% versus 6.15% a year earlier. However, the company's trailing net margin of just 1.09% and gross margin of 15.65% reflect the drag from the loss-making quarters still in the trailing window; on a run-rate basis, the Q3 gross margin of 18.33% is more representative. For a steel manufacturer, an 18% gross margin is respectable but not exceptional — it reflects the commodity nature of the business, where profitability is highly levered to steel spreads and scrap costs rather than pricing power.
Balance sheet and cash flow metrics are solid, though the recent acquisition has altered the capital structure. Debt-to-equity stands at a conservative 0.323, and the current ratio of 2.78 indicates ample short-term liquidity. Trailing free cash flow is $405.0 million, and Q3 FY2026 free cash flow was $76.4 million after $156.1 million of capital expenditures, with operating cash flow of $232.6 million. The Q2 FY2026 acquisition of $2.516 billion (visible in the cash flow statement's acquisitionsNet line) was funded largely from the $3.03 billion cash balance built up in Q1, which explains the sharp drop in cash from $3.03 billion to $503.6 million by Q2-end. ROE of 2.02% and ROA of 6.32% are currently depressed by the trailing loss quarters but should normalize as the profitable quarters roll through. The dividend payout ratio of 96.2% is elevated and worth monitoring, though the 1.25% dividend yield appears covered by the current earnings run-rate.
Quarterly Revenue
$2.5B
2026-05
Revenue YoY Growth
+22.9%
YoY Comparison
Gross Margin
18.3%
Latest Quarter
Free Cash Flow
$405038000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is CMC Overvalued?
Because CMC is profitable on a trailing basis (net income positive, though barely — trailing EPS of $0.013), the PE ratio is the primary metric, but it is distorted by the near-zero trailing earnings. The trailing PE of 76.9x is essentially meaningless given the depressed trailing EPS, while the forward PE of 9.20x — based on consensus FY estimates of $5.69 EPS — tells the real story. The enormous gap between 76.9x trailing and 9.2x forward implies the market expects a massive earnings recovery, with forward EPS of $5.69 versus trailing EPS of $0.013 representing a roughly 437x increase; this is the market pricing in the full normalization of the earnings cycle. The PS ratio of 0.84x and EV/Sales of 1.18x provide cleaner, earnings-independent valuation anchors.
Relative to the broader Basic Materials/Steel sector, CMC screens as inexpensive on forward earnings. A forward PE of 9.2x is well below the typical steel-sector forward multiple (often in the 10-14x range for integrated producers), and the PS ratio of 0.84x is a discount to the sector's typical 1.0-1.5x range. The PB ratio of 1.55x is modest for a company with a 2.78 current ratio and 0.32 debt-to-equity. The discount appears justified by the cyclicality of the business and the market's skepticism about the durability of the earnings recovery — steel stocks typically trade at low multiples at cycle peaks and higher multiples at troughs, and the market may be treating the current forward estimate as a peak-cycle number. The PEG ratio of -0.94 is not meaningful given the negative earnings growth base.
Historically, CMC's PE has ranged widely with the cycle: it traded at 4-8x in the 2021-2022 boom (when earnings were peak), 10-15x in 2023-2024, and spiked above 55x in the 2025 trough quarters when earnings collapsed. The current trailing PE of 76.9x is near the top of its historical band, but this is an artifact of trough trailing earnings, not a valuation warning. The forward PE of 9.2x, by contrast, is near the lower end of the historical range, consistent with a market that is pricing in recovery but not euphoria. The PB ratio of 1.55x sits in the middle of its 1.25-1.85x range over the past three years, suggesting the stock is neither historically cheap nor expensive on an asset basis.
PE
76.9x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 3x~22x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
15.6x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the sustainability of the recent earnings recovery and the company's elevated dividend payout. The trailing net margin of 1.09% and ROE of 2.02% reflect the drag from loss-making quarters, and while Q3 FY2026 net margin was 6.97%, this is still thin for a capital-intensive steelmaker. The dividend payout ratio of 96.2% is a red flag—if earnings decline, the dividend could be at risk, potentially triggering a selloff. Additionally, the $2.516 billion acquisition in Q2 FY2026 reduced cash from $3.03 billion to $503.6 million, leaving less cushion for unexpected downturns. Free cash flow of $405 million TTM is solid but must cover $156.1 million in quarterly capex and the dividend, leaving limited margin for error.
Market and competitive risks are significant given CMC's high beta of 1.52 and cyclical industry dynamics. The stock has underperformed SPY by 16.66 percentage points over 3 months, indicating negative relative momentum that could persist if steel prices weaken. As a commodity producer, CMC has limited pricing power; profitability is highly levered to steel spreads and scrap costs, which are influenced by global trade flows and tariff policies. The recent downgrade by Wells Fargo to Equal Weight on June 4, 2026, highlights concerns about peak-cycle margins. Furthermore, the forward PE of 9.2x, while low, could compress further if the market reprices steel stocks downward due to recession fears or a slowdown in construction activity.
Worst-case scenario: A synchronized global slowdown reduces construction demand, steel prices collapse, and CMC's margins revert to trough levels. The stock could retest its 52-week low of $53.08, representing a 21% decline from the current price of $67.17. If the bear case materializes and the low analyst target of $75 is breached, the next support is the 52-week low. A more severe scenario, such as a recession, could push the stock below $53, especially given the 29.96% max drawdown over the past year. Investors could lose 20-30% from current levels in this adverse scenario, with the high beta amplifying the decline.
FAQ
The most severe risk is a cyclical downturn in steel demand, which could cause earnings to collapse and the stock to retest its 52-week low of $53.08. Second, the high dividend payout ratio of 96.2% leaves little room for error; a cut could trigger a selloff. Third, CMC's high beta of 1.52 means it is 52% more volatile than the S&P 500, amplifying market downturns. Fourth, competitive pressures from steel imports and potential tariff changes could pressure prices and margins. Finally, the recent $2.516 billion acquisition reduced cash to $503.6 million, limiting financial flexibility. These risks are ranked from most to least severe, with the cyclical downturn being the primary concern.
Our 12-month forecast has three scenarios: a base case (50% probability) with a target range of $75-$81, a bull case (30% probability) targeting $84.87-$88.00, and a bear case (20% probability) targeting $53.08-$65.00. The base case assumes moderate recovery with EPS near $5.69 and a forward multiple of 13-14x. The bull case requires accelerating demand and multiple expansion, while the bear case assumes a recession and margin compression. The most likely scenario is the base case, with the key assumption that steel prices remain range-bound and construction demand grows modestly. The wide target range reflects uncertainty about the pace of recovery.
CMC appears undervalued on forward earnings. The forward PE of 9.2x is below the steel sector's typical 10-14x range, and the PS ratio of 0.84x is a discount to the sector's 1.0-1.5x. The trailing PE of 76.9x is distorted by near-zero trailing EPS and is not meaningful. On a price-to-book basis, the 1.55x ratio is in the middle of its 1.25-1.85x range over the past three years, suggesting fair value on assets. The market is pricing in a full earnings recovery, with forward EPS of $5.69 versus trailing EPS of $0.013. If the recovery falters, the stock could be overvalued at current levels, but if it continues, the valuation is compelling. Relative to peers, CMC screens as inexpensive, but the discount reflects cyclicality and peak-cycle skepticism.
From a risk/reward perspective, CMC appears attractive for investors with a moderate risk tolerance and a 12-18 month horizon. The stock trades at a forward PE of 9.2x, well below the steel sector's typical 10-14x, and analyst consensus implies 20.9% upside to the average target of $81.18. The earnings recovery is accelerating, with Q3 FY2026 EPS of $1.56 versus a loss a year ago, and revenue up 22.9% YoY. However, the biggest downside risk is a cyclical downturn that could push the stock back to its 52-week low of $53.08, a 21% decline. The high beta of 1.52 and the 96.2% dividend payout ratio add risk. For those who can tolerate volatility and believe the recovery is sustainable, CMC offers a favorable risk/reward, but it is not a low-risk investment.
CMC is more suitable for a medium-term investment horizon of 12-18 months rather than short-term trading or very long-term holding. The stock is in a cyclical recovery phase, and the earnings inflection is expected to play out over the next 4-6 quarters. The high beta of 1.52 and 29.96% max drawdown make it too volatile for short-term traders unless they are nimble. The dividend yield of 1.25% is modest and not a primary reason to hold. For long-term investors, the cyclical nature of the steel industry means returns are highly dependent on entry and exit points. A minimum holding period of 12 months is suggested to allow the recovery thesis to materialize, but investors should be prepared to reassess if fundamentals deteriorate.