Nucor Corporation (NUE)

Total return at 5 years: -0.4%/year = -1.4% appreciation + 1.0% dividend. The target price ($235) is ex-dividend; the $12 in dividends collected over 5 years are added separately.

The methods disagree: one places the value today above the price ($252) and the other below.

Today — expensive, no margin of safety: at $252 trades ~26.3% above its value discounted to today (~$199); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$125.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($252) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-2.3%/year) than we project (4.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$2.6 bn of owner earnings in year 5 (vs ~$3.6 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on Utilidad neta atribuible al punto medio del ciclo (P/E). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Nucor is valued on P/E over net income attributable to Nucor shareholders: the non-controlling interest (372 million in the twelve months ended 4 July 2026, 11.4% of consolidated earnings of 3,256 million, or 12.9% of attributable earnings) is excluded by construction, and stock-based compensation (146 million, 9.2% of free cash flow of 1,583 million) is expensed within earnings. Being a cyclical business, year-0 earnings are not extrapolated from the peak: but the quarter ended 4 July 2026 (8-K of 27-Jul-2026) shows that the recovery has already taken the TTM net margin to 8.0%, the same disciplined midpoint —between the recent trough (5.4% in 2025) and the upper part of the prior cycle (13.0-18.3% in 2022-2023)— that the original path projected only for year 5. The base path no longer 'recovers' from that trough: it holds close to the same midpoint (8.0-8.3%) without extrapolating the further improvement the company guides for the third quarter of 2026 in most segments. Working capital and debt sit within earnings via interest expense (168 million TTM), which is why starting cash and debt are zero. Buybacks are modeled explicitly: the sustained net share reduction was approximately 4% a year between 2022 and 2025, but 1.5% a year is projected because the pace slowed (675 million in the last twelve months against 2,217 million in 2024) and because the current price makes each retired share more expensive.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $235 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $252, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $235 in 5 years plus $12 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $199. Against the current market price ($252), the margin of safety is -26.3% (trades above the maximum → a premium is paid) and the total return at that price would be -0.4% annually.

• Entry multiple. 20× on trailing twelve-month earnings, which already corresponds to an 8.0% net margin, the cycle midpoint.
• Price versus range. The price already reflects the recovery of earnings to the cycle midpoint.
• Exit multiple. 13×, the center of the 10-16 band for commodity-quality cyclical; neither the ceiling nor peak margin is used.
• Estimated return. -0% annually over five years including dividend: No margin of safety: the price already discounts a demanding scenario.

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (103%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on invested capital. Approximately 12.8% on actual invested capital ($26,516M), within the method's good band (10-15%): return has recovered with the cycle, not projected.
• Cash generation predictability. Operating cash flow went from $10,072M in 2022 to $3,234M in 2025 and has recovered to $4,424M in TTM: variability remains the dominant characteristic.
• Reinvestment track. $8,900M of capex invested over three years in higher-value-added capacity, with the West Virginia plant alone now estimated at approximately $4,000M —above the original budget— and investment guidance dropping to approximately $2,500M in 2026.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Nucor's revenue is tons shipped times average price per ton, and the margin is the spread between that price and the cost of scrap. In 2025 volume drove all of the growth (26.6 million tons versus 24.8) while price subtracted ($1,221 versus $1,241) with the cost of scrap practically stable ($392 versus $394). The recovery deepened in the second quarter of 2026: price (+10% year over year, to $1,367 per ton) and volume (+12%, to 7.6 million tons) rose together, and steel mill utilization jumped to 91% —versus 83% in the 2025 average— leaving little idle capacity available for further recovery without new investment. The steel mills backlog, which rose 57% in 2025 ($2,130 million to $3,350 million), is already-contracted demand, not just a spot-price reading.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (4-jul-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Growth driver. In Q2 2026, price (+10% per ton) and volume (+12% shipped) recovered together, unlike 2025 when volume grew as price fell.
• Capacity utilization. Mills at 91% in Q2 2026 versus 83% average in 2025: the idle capacity that remained has been absorbed with strength.
• Demand cyclicality. Construction, energy and automotive are cyclical and results move with the steel-scrap spread.
• Company guidance. Guided to higher consolidated earnings for the third quarter of 2026 versus the second, at steel mills and steel products on price and volume, backed by a backlog at historically high levels (+57% at steel mills, +11% at steel products during 2025); only raw materials expects lower earnings on lower margins.

• Differentiated or generic product. Commodity steel is homogeneous and the customer chooses on price and availability, with no switching costs; Nucor promotes branded lines (AEOS®, ECONIQ™, ELCYON®) but with no evidence that they sustain a price above the market.
• Pricing power. It is a price-taker in the long cycle, although average price per ton rose 10% year-over-year in Q2 2026 with demand recovering.
• Relevance in ten years. Steel remains structural input for construction, energy and transportation; demand is not in question.
• Position on the cost curve. Variable cost structure via electric arc furnace and integration into raw material inputs, reinforced by the sector's strongest credit ratings (A-/A-/A3) and a compensation system that distributes 10% of pre-federal-tax earnings, flexing labor cost in the trough of the cycle: it comes through the bottom of the cycle with positive earnings.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✓Interest coverage (EBIT / interest)25.4x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 103% of ROIC
• !Value creation (ROIC − 10% bar)+3pp
• !Malinvestment test (capex vs incremental ROIC)Capex/D&A 2.3x
• –Float / working capitalNeutral WC
• ✓Dilution (SBC % of revenue + shares)SBC 0.4% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Interest coverage. $168M interest expense in TTM against operating income of several billion: more than twenty times.
• Debt and liquidity. $7,099M of gross debt ($6,933M long-term, with staggered maturities out past 2031 and no near-term wall) against $2,692M of cash and short-term investments, plus an undrawn $2,250M unsecured revolving line and a single restrictive financial covenant —funded debt to total capital not to exceed 60%— met with ample margin (24.4% real). In 2025 it refinanced with two note issuances ($500M at 4.650% due 2030 and $500M at 5.100% due 2035) to redeem $1,000M maturing that year, and issued $220M in variable-rate industrial development bonds for the West Virginia flat-rolled plant.
• Free cash flow. $1,583M in TTM, already recovered with reduction of expansion capex ($2,841M) and earnings improvement.
• Capital return versus generation. $512M dividend plus $675M buyback ($1,187M total) is below the $1,583M free cash flow in TTM: the company again generates more than it returns.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO trajectory. Leon Topalian, CEO since 2020 and Chairman of the Board since 2022, with twenty-nine years of internal operations career, including the Chief Operating Officer role before becoming CEO. In December 2025 he gave up the President title, and in January 2026 Stephen Laxton (CFO since 2022) became President and Chief Operating Officer, succeeding David Sumoski.
• Capital allocation. Around 70% of cash uses to reinvestment during expansion; buyback was cut from $2,217M to $700M when earnings fell in 2025 and has recovered to $675M in TTM, without touching dividend.
• Management ownership stake. Leon Topalian holds total beneficial ownership of 475,278 shares (0.21% of class) between direct shares, options and restricted stock units per the proxy of Mar-27-2026. The 19 directors and executives as a group own 1,406,923 shares (0.62% of class): alignment stake, not control.

• It is not cheap: the price incorporates cycle recovery, which in addition to pricing it has already occurred. Trailing twelve-month earnings already correspond to an 8.0% net margin, the cycle midpoint.
• The market is paying for tariff protection, the backlog at historically high levels and grid and data center demand as if they were permanent margin guarantees, when the annual report describes Section 232 as a reversible regime and the backlog is already-contracted volume, not guaranteed margin.
• The multiple on cycle-midpoint earnings no longer has the ambiguity of months ago—when TTM earnings were depressed and the multiple appeared costlier than it was—: today actual and normalized earnings virtually match, so the multiple shown is the real multiple, and it leaves no discount.

No perception-versus-reality gap in the buyer's favor can be identified: there is no motivated seller and no lack of coverage. What there is, is a well-understood cyclical with earnings already recovered and a price that reflects it. The second-quarter 2026 earnings release (8-K of 27-Jul-2026) was reviewed, which post-dates the quarter used for the trailing twelve months: as is customary in the steel sector, the company publishes no annual guidance and only anticipates a quarterly improvement — higher realized prices across the main categories, stable volumes — consistent with the base path and with no reason to adjust any number.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -9%/year (-37% total): the margin of safety protects the downside. The bull (+14%/year, +90% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Global overcapacity. Approximately 704 million tons of excess per the Organization for Economic Cooperation and Development in 2025, with projection to grow about 20% by 2027.
• Tariff dependency. Section 232 supports the domestic price today, with 142 antidumping and countervailing duty orders in effect on core product lines, and the annual report warns that its expiration or relaxation would reopen import pressure.
• Industry capital cycle. Capital enters where returns are high and compresses them: new capacity competes for the same demand.
• Energy cost. Electric arc furnace mills and direct-reduced iron plants depend on electricity and natural gas with volatile pricing, and decarbonization pressure on the power grid can affect the cost and reliability of supply.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A narrow moat and ROIC 13% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 5% at a PEG of 4.4 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 7% (EBIT/EV) + ROIC 13% → brushes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -2% vs our 5%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -10%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: cost advantage, efficient scale → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -2%, within what we project (5%) — the story squares with the numbers.