This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

September 25, 2008 - Schnitzer Steel Industries (SCHN-NASDAQ) engages in recycling ferrous and nonferrous metals, and used and salvaged vehicles; and manufacturing finished steel products in the United States and Canada. It operates in three segments, Metals Recycling Business (MRB), Auto Parts Business (APB), and Steel Manufacturing Business (SMB).

The APB segment purchases used and salvaged vehicles, and sells used parts from these vehicles through its auto parts stores. As of August 31, 2007, it operated 52 auto parts stores located in the United States and Canada.

The SMB segment engages in the purchase of recycled metal and processing of the recycled metal and other raw materials into finished steel products. Its product portfolio comprises rebar, coiled rebar, wire rod, merchant bar, and other specialty products. This segment serves steel service centers, construction industry subcontractors, steel fabricators, wire drawers, and farm and wood product suppliers. The company was founded in 1946 and is headquarteredin Portland, Oregon.

Two things caught my eye about Schnitzer. First it was trading at $118.55, an all-time high, only a few months ago. Now it's at $49 (as of this writing). The reasons for the slide: scrap metal prices went from $520 a ton to $420 a ton in July. There are concerns about slowing growth in world markets as well, particularly emerging economies such as China, the world's largest steel producer. The second: earnings are projected to be $7.02 in 2009, putting the stock at about 7 times its forward P/E ratio. Is this a bargain? Maybe.

It all depends on how world economies do. If China rebounds and starts up its economic engine again, it will buy lots of steel to build factories and buildings. That country alone can make a huge difference to all steel producers, not just Schnitzer. The company exports two thirds of its scrap metal.

There's some speculation that Schnitzer is a good takeover candidate, most likely from a foreign buyer somewhere in Russia or China. Company officials make no comment on this one. But if the company were to sell, some analysts see a price of $150, a little less than 10 times the 2009 cash flow of $15.57 a share. Again, this is a buyout rumor that has no confirmation.

With a cheaper dollar, Schnitzer can sell scrap and steel internationally at a competitive advantage. It also has another advantage: it owns 6 shipping facilities on the East and West coasts and Hawaii. Its plants are close to these deep water ports, allowing it to export scrap at lower costs.

This is company that recycles. Fully 80% of its revenues come from recycling ferrous and nonferrous metals. The ferrous metals contain iron. Revenues were $2.57 billion in 2007. Analysts see $3.51 billion this year and $3.93 billion next year. That would put sales growth at 36.4% this year and 12.1% next year.

More numbers: Market Cap is $1.4 billion with 28.139 million shares outstanding. Price to sales for the trailing 12 months is .45. Price to Book is 1.6. Return on Assets was 12.2% for the last 12 months while Return on Equity was 19.45%. There is a small dividend of 7 cents a year, giving a yield of .1. The dividend only takes 1% of earnings to pay. Total debt is $240 million giving a Debt to Equity ratio of .275. Current ratio (current assets divided by current liabilities) is 2.47. Book Value per share is $31.

Schnitzer is selling for less than half the price it was only a few months ago. True, prices for commodities are down as are scrap metal prices. But the stock is off much more than the scrap prices, suggesting investors believe there's more slippage in scrap metal coming. If they're right, then the stock is fairly priced. But that isn't what the company believes or many analysts. With earnings projected to grow significantly this year and next, this stock seems to be well worth an aggressive investor's time to further investigate.

- Company Web site: www.schnitzersteel.com

- Ted Allrich