Ternium S.A. (TX)
Siderurgia y minería de hierro (Latinoamérica)
Integrated steel producer in the Americas emerging from the bottom of the cycle with the largest investment plan of the past decade nearly complete: at $55 per ADS the market is paying 12× on mid-cycle earnings, and the estimated total return is +6% annually — Fairly valued.
- Price
- $54.76
- Intrinsic value (5y, base)
- $66
- Total annual return (5y)
- 6.3%
- Status (nominal)
- Fairly valued
- Margin of safety
- +8%
The essentials
- Fiscal year 2025 was the bottom of the cycle: revenue fell 11.6% and operating income fell 44%, with the operating margin compressed to 4.5% from 16.4% in 2022.
- The first half of 2026 already shows the recovery: sales of US$8,274 million (+5.0% year over year) and operating income of US$818 million versus US$331 million a year earlier.
- The valuation runs on mid-cycle earnings (US$912 million, trimmed average 2020-2025), never on the 2021 peak or the 2024 loss.
- Consolidated capital expenditure was US$2,501 million in 2025 (US$2.5 billion per the 20-F), of which the steel operations at Ternium Mexico and Tenigal, where the Pesqueria Industrial Center is located, absorbed US$2.0 billion; 2026 guidance drops to US$1,900-2,100 million.
Intrinsic value — two valuation methods
Total return at 5 years: 6.3%/year = 3.9% appreciation + 2.4% dividend. The target price ($66) is ex-dividend; the $7 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $121 · Multiples $59) exceeds the market price ($55).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $55 trades ~7.9% below its value discounted to today (~$59); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($66) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$38.
Thesis
The business
An integrated steel producer with hard-to-replicate assets across the Americas, but one that sells a market-priced product and therefore does not control its own profitability. Return on invested capital was 3.2% in fiscal year 2025 and 7.29% measured on mid-cycle profitability: in both cases below the 10% bar, which is the central quality fact of this company.
The valuation
It is valued on a multiple of normalized mid-cycle attributable earnings, the metric the method requires for a market-priced business. Mid-cycle earnings are US$912 million — a trimmed average of the 2020-2025 series, excluding both the 2021 peak and the 2024 loss — and the exit multiple is 11 times, within the range for its category and toward the low end because of return on capital and cyclicality. The estimated five-year value is $66 per ADS.
The margin of safety
It trades close to intrinsic value, far from the required margin of safety. At $55 per ADS, with the stock near its fifty-two-week high, the estimated total return is +6% annually, of which a meaningful part comes from the dividend: the current yield is 2.4%. The verdict is Fairly valued.
What to watch
The disconfirmer is the price of flat steel in Mexico and Brazil together with the execution of Pesqueria: if the new steel mill enters service by the end of 2026 and capital expenditure falls to maintenance level, the freed-up cash sustains the thesis; if the price falls back and the investment drags on, free cash flow stays negative. The second checkpoint is CSN's litigation over the 2012 acquisition of the stake in Usiminas.
Educational / informational. Does not constitute investment advice.