Nova Chemicals Has Potential for Strong Recovery

Nova Chemicals Inc. (NCX) was one of the many market casualties in 2008, with shares falling more than 80% on concerns about the economy and credit crisis.

According to Canaccord Adams analyst Bob Hastings the stock has been beaten up so much that it now trades at roughly 10% of replacement cost. That's significantly lower, he said, than the the 50% of replacement cost that is often seen at previous trough valuations.

Mr. Hastings told clients in a note that he is confident the stock can recover to normal trough levels when economic concerns begin to ease. In the interim, he still expects the stock price to improve, maintaining his US$15.00 price target and "buy" rating to "reflect that the stock could trade at a low 5 times cash flow until investors get a better handle on the timing of an economic improvement."

"The company’s assets are some of the best in North America and generally have a long-term cost advantage," he added. "Our greater concern over the near term is that the stock could be taken out by a stronger player at a low price."