Home Stock Market With the Evraz share price down 63%, is it finally a buy? – The Motley Fool UK

With the Evraz share price down 63%, is it finally a buy? – The Motley Fool UK

by callingemout
Diggers and trucks in a coal mine

Key points

  • The Evraz share price has plummeted 63% in the past week, because of the ongoing military situation in Ukraine
  • There are fears the company could be targeted with Western sanctions
  • Financially, the firm is strong with free cash flow up to $2.26bn from $1.02bn

In recent days, the Evraz (LSE: EVR) share price has plummeted. The company specialises in iron ore and coal mining, and operates in the U.S., Canada, Czech Republic, and Russia. As one might expect, the reason for the collapse in the share price has been the recent military action by Russia in Ukraine. As a Russian business, some investors are worried that Western sanctions will target the firm. However, I want to look below the surface to determine how attractive the business is based on its results. Let’s take a closer look. 

Recent events and the Evraz share price

The escalating military campaign by Russia against Ukraine caused panic in markets around the world. In the past week, the Evraz share price is down 63%. It is currently trading at 96p. However, the company is not alone in this price move. The share prices of gold companies Polymetal International and Petropavlovsk, and iron ore business Ferrexpo, have all collapsed too.

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There is a lot of fear among investors that Evraz, or individuals within the management, could face international sanctions by Western governments. While I recognise that this is a possibility, nothing has yet materialised. Of course, the longer the war rages the worse the situation becomes for all, including the Evraz share price. For the sake of an end to suffering, I hope a ceasefire is announced very soon.  

Strong financial results

Looking past the recent turmoil and its impact on the Evraz share price, the underlying financial state of the business is solid. Between 2017 and 2021, revenue grew from $10.8bn to $13.4bn. Furthermore, earnings-per-share (EPS) rose from ¢49 to ¢208. This tells me the firm is delivering for its shareholders year in, year out. Also, iron ore production increased by 1.4%, year on year.  

Additionally, free cash flow improved to $2.26bn from $1.02bn in 2020. This was complimented by a decrease in net debt from $3.36bn to $2.67bn. This suggests to me that the company is in a strong financial position. I am confident it can ultimately weather the ongoing storm. 

Evraz’s trailing price-to-earnings (P/E) ratio of 2.64 is lower than the 3.28 of Severstal, a major competitor in the steel market. While this potentially indicates that the Evraz share price is cheaper, I’m not sure how much use this metric currently has, given recent market volatility. In essence, the P/E ratios may be artificially low because of the dramatic collapse of the share prices.  

Based on its results, I think Evraz is a good company. Given the current situation, however, I will delay any purchase. I would like to see an improvement in conditions in Ukraine before I think about buying shares, but I will not rule out a purchase in the future.

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Andrew Woods owns shares in Polymetal International. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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