Will Cliffs Natural Resources Outperform?

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With shares of Cliffs Natural Resources (NYSE:CLF) trading at around $38.17, is CLF an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

coalToday’s big news is that Cliffs Natural Resources is looking to sell its 30 percent stake in Amapa. The value of Amapa has likely declined considerably over the past six months. Cliffs Natural Resources wants to adjust the Amapa value to reflect the fair value of its investment (at least $479 million.) Cliffs Natural Resources will  also take a pretax impairment charge of $380 million to $420 million. If that’s not enough to ignite the celebratory mood that lays within you, then perhaps a 62.43 percent drop in net operating cash flow, a delayed mine in Quebec, and idle production at two U.S. iron ore operations will do the trick. Yes, this is sarcasm, which is known to accompany bad news.

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The good news is that margins are still solid, ROE is 13.43 percent, the Trailing P/E is 6.03, and the Forward P/E is 12.85. Therefore, if you believe in the company’s future, then this would be a great entry point. It should be noted that there is a 19 percent short position. It seems as though many people are confident in the company’s future declines.

Let’s look at some important numbers for Cliffs Natural Resources in an effort to find reasons for optimism.

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