Why Olympic Steel's Shares Dropped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of manufacturer Olympic Steel dropped 12% today after the company reported earnings.

So what: Third quarter revenue dropped 11.3% to $304 million, missing Wall Street's $331.8 million estimate by a wide margin. On the bottom line, earnings of $0.12 per share were $0.27 below estimates, despite cost reductions.  

Now what: Clearly the company's end markets are struggling, and a transition to higher value products is taking time. Despite improved margins, investors may be walking into a value trap in Olympic Steel. Shares trade at just 14 times next year's estimates, but if revenue continues to deteriorate there's nowhere to go but down. I'm definitely not a buyer today, and would wait for revenue improvements before considering the stock.

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The article Why Olympic Steel's Shares Dropped originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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