The extreme volatility that the market has recently experienced has many investors seeking out plays that can add stability to their portfolios. Enter steel service center company Olympic Steel Inc. (Nasdaq:ZEUS), a dish literally fit for the gods.

The company was incorporated in Cleveland, Ohio in 1954 with an initial focus on producing hot- and cold-rolled sheet steel. Olympic went public in 1994 and in 1997 entered into a joint venture with United States Steel Corp. (NYSE:X) to produce laser sheet steel banks for the automotive industry. Today the company has its focus on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel products. 

With a market cap of $461 million, Olympic acts as an intermediary between steel producers and manufacturing companies that utilize processed steel in their operations. It has 15 processing and distribution facilities located in the midwestern and eastern United States.

Over the course of the company’s history, Olympic has been able to grow its business both organically and through acquisitions. The company has a seasoned management team that includes a CEO and COO who each have more than 20 years of service with the company. Taken together, these factors have led Olympic’s stock price to heat up over the past year to close at $42.50 on Thursday.

For the fourth quarter ended Dec. 31, Olympic reported net income of $4.5 million, or $0.42 per diluted share. Net sales came in at $236.1 million. These figures represented respective increases of 20% and 4.4% over the year ago quarter. For 2008, analyst estimates are calling for EPS of $3.68 on $1.14 billion in revenue. These projections would mark 10.7% and 56.6% respective improvements over the company’s 2007 full-year results.

In the fourth quarter, Olympic was able to grow its business organically as its tons sold increased 7.1% to 291,000 from 272,000 in the fourth quarter of 2006. The company succeeded in gaining market share as well as maintaining better-than-industry asset turnover. Another positive trend that the company experienced in 2007 was a more even distribution of its revenue. In 2006, Olympic’s top three customers accounted for 21% of its net sales. In 2007, this figure decreased to 13%. The successful year enabled the company to increase its cash position and strengthen its balance sheet.

Going forward, Olympic plans to continue along its path of success. In 2007, the company had $12.5 million in capital expenditures. It also added 54,000 square feet to its facility located in Iowa.

One of the biggest challenges that the company will face in 2008 is the rising cost of steel.

“The higher input prices (steel) are a concern given that they are supply driven rather than demand driven,” Robert Schenosky, an analyst for Jefferies & Company, Inc. (NYSE:JEF), wrote in a research report last month. “Our industry contacts have suggested that there is pushback from customers on price and due to weak demand and an inability to pass increases onto customers or further into the supply chain.”

In addition to the rising cost of steel, Olympic’s chairman and CEO Michael Siegal foresees some additional challenges for the company in its upcoming quarters. “We are presently seeing extraordinary increases in steel pricing caused by a lack of inventory in the industrial sectors, rising global steel input costs, freight costs and global demand as well as a continued weak U.S. dollar,” he said. “We anticipate these conditions to remain for the foreseeable future.”

Despite the commodity cost pressure that Olympic (ZEUS) is facing, the company has more than 50 years of success under its belt and, like its ticker, may be the leader your portfolio needs to weather the current storm.