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How The Pieces Add Up: SLX Headed For $77

By Metals Channel Staff, Thursday, September 23, 9:54 AM ET

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, we have compared the trading price of each holding against the average analyst 12-month forward target price, and computed the weighted average implied analyst target price for the ETF itself. For the Steel ETF (NYSE:SLX), we found that the implied analyst target price for the ETF based upon its underlying holdings is $77.23 per unit.

With SLX trading at a recent price near $55.62 per unit, that means that analysts see 38.86% upside for this ETF looking through to the average analyst targets of the underlying holdings. Three of SLX's underlying holdings with notable upside to their analyst target prices are Schnitzer Steel Industries Inc (NASDAQ:SCHN), Gerdau S.A. (NYSE:GGB), and Vale SA (NYSE:VALE). Although SCHN has traded at a recent price of $40.32/share, the average analyst target is 98.41% higher at $80.00/share. Similarly, GGB has 62.11% upside from the recent share price of $4.75 if the average analyst target price of $7.70/share is reached, and analysts on average are expecting VALE to reach a target price of $23.54/share, which is 43.34% above the recent price of $16.42. Below is a twelve month price history chart comparing the stock performance of SCHN, GGB, and VALE:

SCHN, GGB, and VALE Relative Performance Chart

Combined, SCHN, GGB, and VALE represent 17.09% of the Steel ETF. Below is a summary table of the current analyst target prices discussed above:

Name Symbol Recent Price Avg. Analyst 12-Mo. Target % Upside to Target
Steel ETF SLX $55.62 $77.23 38.86%
Schnitzer Steel Industries Inc SCHN $40.32 $80.00 98.41%
Gerdau S.A. GGB $4.75 $7.70 62.11%
Vale SA VALE $16.42 $23.54 43.34%

Are analysts justified in these targets, or overly optimistic about where these stocks will be trading 12 months from now? Do the analysts have a valid justification for their targets, or are they behind the curve on recent company and industry developments? A high price target relative to a stock's trading price can reflect optimism about the future, but can also be a precursor to target price downgrades if the targets were a relic of the past. These are questions that require further investor research.

The average analyst target price data upon which this article was based, is courtesy of data provided by Zacks Investment Research via Quandl.com.
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This Article's Word Cloud:   Analyst   Below   ETFs   FREEGet   Gerdau   Industries   NYSE   SCHN   Schnitzer   Steel   Target   Upside   VALE   Vale   With   Zacks   about   above   analyst   analysts   average   background   based   border   bottom   color   data   font   from   have   hctblstyle   holdings   implied   latest   mdash   month   padding   price   prices   recent   report   research   share   solid   target   targets   that   trading   underlying   upside

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