Cleveland-Cliffs Inc.

Analysis of Cleveland-Cliffs (CLF)

Technical Analysis CLF has shown considerable weakness, dropping nearly 25% over the past month and underperforming the broader market. Its high beta of 1.96 reflects extreme volatility, though trading near the lower end of its 52-week range suggests the downside momentum may be easing. While not at absolute lows, the stock appears oversold after a significant drawdown.

Fundamentals The company faces severe profitability challenges, with declining revenue, negative gross margins, and operating losses highlighting operational stress. Although liquidity appears adequate with a current ratio of 1.95, negative operating cash flow and weak interest coverage raise concerns about financial sustainability. Efficiency metrics like negative ROA and low inventory turnover further underscore operational difficulties.

Valuation & Peer Comparison Negative earnings render traditional valuation metrics like P/E and EV/EBITDA meaningless, though a price-to-book ratio below 1 suggests potential undervaluation based on assets. Without industry benchmarks, it’s unclear how CLF stacks up against peers, but the distressed fundamentals likely overshadow any apparent valuation appeal.

Risks CLF carries high volatility risk, with a beta near 2 and a history of steep drawdowns. While low short interest reduces near-term speculative pressure, liquidity and operational risks tied to the steel sector remain significant challenges for stability and recovery.

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Investment Recommendation

Based on the analysis, CLF does not present a compelling buy opportunity at this time. The stock’oversold technical position is outweighed by deeply troubled fundamentals, including persistent losses, cash flow concerns, and inefficient operations. While the low price-to-book ratio may attract value hunters, the absence of clear profitability improvements or sector tailwinds suggests substantial downside risk remains. Investors should await signs of operational stabilization or sector recovery before considering a position.

RockFlow Model Forecast: Three Scenarios for 2026

Of course. Here is a 12-month outlook for Cleveland-Cliffs (CLF) based on the provided analysis.

12-Month Outlook for CLF:

The outlook for CLF is challenging, with its near-term fate heavily tied to volatile steel prices and broader industrial demand. A key catalyst for a rebound would be a significant infrastructure-led recovery in the U.S. steel market, which could improve pricing and utilization rates for this major producer. However, the primary risks are substantial, including persistent operational losses, negative cash flow, and the company's high sensitivity to economic cycles, as evidenced by its elevated beta. Given the deeply distressed fundamentals and lack of a clear positive catalyst, the stock is likely to remain under pressure, with any rally being susceptible to a reversal; a realistic target range would be a retest of recent lows near $8, with rallies potentially capped around $12-13 without a fundamental operational turnaround.

Wall Street Consensus

Most Wall Street analysts are optimistic about Cleveland-Cliffs Inc.'s 12-month outlook, with consensus target around $10.27, indicating expected upside potential.

Overall, CLF has investment potential but also faces challenges. Here are key factors to weigh before investing.

CLF has delivered mixed performance with sharp recent declines overshadowing modest longer-term recovery from its 52-week low.

The stock has experienced severe short-term pressure, plummeting nearly 25% over one month while underperforming the market by over 5 percentage points during the past three months, reflecting significant investor pessimism. CLF's elevated beta of 1.96 confirms this heightened volatility, suggesting the stock has been substantially more volatile than the broader market.

Currently trading at approximately 46% of its 52-week range, CLF appears oversold despite recovering from its extreme lows, with the -51.5% maximum drawdown indicating substantial historical downside exposure. While not at absolute bottom levels, the stock's position nearer the lower end of its range suggests limited downside momentum from current levels.

Revenue & Profitability: CLF faces significant profitability challenges with declining revenue from Q3 to Q4 2025 ($4.73B to $4.31B) and negative gross margins worsening to -4.4%. The company reported substantial operating losses ($322M in Q4) and negative net income margins, indicating severe pressure on profitability amid falling sales.

Financial Health: While CLF maintains adequate short-term liquidity with a current ratio of 1.95, its financial health is concerning due to negative operating cash flow and weak cash position (cash ratio of 0.017). The interest coverage ratio of -1.26 indicates insufficient operating earnings to cover interest obligations, highlighting potential liquidity strain.

Operational Efficiency: Operational efficiency metrics reflect significant challenges, with negative returns on assets (-1.2%) and equity (-4.1%) indicating poor capital utilization. The low asset turnover of 0.22 and inventory turnover of 0.95 suggest inefficient asset management and potential inventory buildup relative to sales volume.

Valuation Level: Cleveland-Cliffs' valuation metrics are challenging to interpret meaningfully due to negative earnings, as evidenced by negative TTM and forward PE ratios along with a negative EV/EBITDA. The stock appears inexpensive based on its book value with a PB ratio below 1, but the positive PEG ratio suggests the market is pricing in future earnings growth despite current unprofitability. The negative earnings-based metrics indicate the company is currently unprofitable, making traditional valuation assessments difficult.

Peer Comparison: Unfortunately, a formal peer comparison cannot be conducted as industry average data is not available for this analysis. However, a PB ratio below 1.0 typically suggests the stock is trading below its book value, which could indicate potential undervaluation relative to asset base if compared to profitable industry peers. The absence of benchmark data prevents determining whether CLF's metrics represent an outlier within the steel manufacturing sector.

Volatility risk is pronounced given the stock's beta of 1.958, indicating it is nearly twice as volatile as the broader market. This elevated sensitivity is further evidenced by a substantial one-year maximum drawdown of -51.5%, highlighting significant potential for large capital depreciation during adverse market conditions or company-specific events.

From an other risks perspective, the notable absence of any reported short interest can be interpreted as a mitigating factor, suggesting a lack of concentrated speculative bets against the company in the near term. However, this does not preclude liquidity or operational risks inherent to its sector. Investors should remain attentive to the firm's fundamental business cycles and market liquidity.