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Is this the best growth stock buy in the FTSE 100 right now?

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High-flying growth stocks often soar to greatness, but then something goes wrong and they crash back down. And then a recovery and a second growth spurt can frequently provide the best long-term buying opportunity of all. It usually happens with smaller companies pioneering new markets. But today I’m looking at FTSE 100 steel producer Evraz (LSE: EVR).

By June 2019, the Evraz share price was flying. Investors were sitting on a seven-bagger in just five years. But it all went horribly wrong, and between that peak and March this year, Evraz crashed by 70%. That does include the 2020 pandemic crisis, but the shares were firmly on the way down before then.

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Some might see this as a warning against investing in volatile growth shares. But, investors who bought five years ago and held their nerve are actually doing very well. Had they been able to sell out at that 2019 high point they’d have pocketed even bigger profits, sure. But even in the depths of 2020, Evraz shares had still more than doubled over the previous five years — while the FTSE 100 was in negative territory.

5-year performance

And since March, Evraz has put in one of the FTSE 100’s best recovery performances. The result? An overall five-year rise of 325%.

Evraz is one of the world’s biggest producers of steel. But more than that, Evraz is part of the business from beginning to end. It is involved from mining iron ore and coal all the way to selling finished steel products. How can that not be a great business to be in for the long term?

It is a cyclical business, and Evraz has had a couple of tough years. And 2020 is a year of pressure too, across the FTSE 100’s mining and commodities businesses. On Thursday, Evraz told us that crude steel output declined in the third quarter, down 4.4% quarter-on-quarter. That’s apparently because of a planned blast furnace shutdown and overhaul. But sales of total steel products fell too, by 9.5%. But on the upside, external sales of coking coal products and iron ore products rose quarter-on-quarter, by 23.6% and 9% respectively.

Beating the FTSE 100

The bulk of Evraz’s production is in Russia, which will undoubtedly put a lot of investors off. But the commodities market is global. And I can’t help thinking today’s low Evraz share price more than compensates for the risks. The shares have fallen 11% so far in 2020, compared to the FTSE 100’s 25% drop. But I wouldn’t be at all surprised to see Evraz shares ending the year in profit.

Forecasts put the shares on a price-to-earnings multiple of 10 for the current year, dropping to only around 7.5 for 2021. I see that as an attractive growth stock valuation. But there are dividends too, and the older I get, the more I like dividends. Forecast yields stand at approximately 8% this year and 8.5% next. I wouldn’t rely on dividends from the sector to be consistent, and I’d expect them to be cyclical too. But when I see yields like that from shares on such a low fundamental valuation, I reckon I’m looking at a bargain. I’d buy.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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