Evraz share price has collapsed. Has it become too cheap to ignore?

on Mar 2, 2022
  • The Evraz share price has collapsed by 84% from its all-time high.
  • It is trading at the lowest level since 2016 because of its Russian heritage.
  • The stock will likely bounce back in the long term.

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The Evraz (LON: EVR) share price has collapsed to the lowest level since 2016 as concerns about the company’s ties to Russia rise. The stock is trading at 102p, which is about 84% below the highest level in 2021. It is one of the worst performers in the FTSE 100.

Why has Evraz plummeted? 

Evraz is a leading company involved in the commodities industry. The firm produces steel, coal, and vanadium products. While it operates in several countries, most of its operations are in Russia. In fact 94.8% of its employees are from Russia while 5% are in North America. 

Evraz is associated with Roman Abromavic, who is the owner of Chelsea Football Club and one of the wealthiest people in Russia. 

The Evraz share price has collapsed as investors worry about the company’s future now that the Russian economy has been sanctioned by western countries. The sanctions mean that Evraz will struggle doing business outside of Russia in the coming months. 

However, there are signs that the stock’s sell-off has been irrational. For one, before the sanctions, the company was doing relatively well. Its annual revenue jumped to more than $14.1 billion in 2021 from the previous $9.7 billion. Its total EBITDA more than doubled to more than $5 billion while the management managed to slash its net debt by 21% to $2.667 billion. 

This performance happened as the company boosted its capital expenditure by 40% to $920 million. While Evraz will be hurt by sanctions by western countries, there is a likelihood that it will still find buyers from China. Also, the Russian government has promised to support companies hit by sanctions. 

Therefore, from a fundamental point, the Evraz share price seems like it has gotten undervalued since investors expect that it will go out of business. 

Evraz share price forecast 

The daily chart shows that the EVR share price was in a downward trend even before the fighting in Ukraine started. The sell-off accelerated in the past two weeks. It has moved below the 25-day and 50-day moving averages. Also, the pair formed a death cross, which happens when the 50-day and 200-day moving averages make a crossover. 

Therefore, while the stock will likely keep falling in the near term, there is a likelihood that it will bounce back in the long term.