I recently wrote a piece on Dow Chemical’s (DOW) undervaluation. Another chemical firm with a low valuation and high dividend yield is DuPont.
DuPont (DD) – “E. I. du Pont de Nemours and Company operates as a science and technology company worldwide. It operates in seven segments: Agriculture & Nutrition, Electronics & Communications, Performance Chemicals, Performance Coatings, Performance Materials, Safety & Protection, and Pharmaceuticals.” (Business Description from Yahoo Finance)
8 reasons Dupont is a great value at $43:
- Dupont has an A rated balance sheet and yields 3.9%.
- DD has beat earnings estimates 11 of the last 12 quarters. Its average beat over the consensus the last four quarters has been 20%.
- The expansion of natural gas production in the United States is helping DuPont by keeping one of its main feedstock costs low.
- Earnings estimates for 2011 and 2012 have risen over the last ninety days.
- Dupont is experiencing rapidly increasing revenue growth, north of 20% in 2011 and expected to be 10% in 2012.
- Its agricultural division (25% of revenues) is a good secular play on increasing demand for food in the emerging markets.
- DuPont has a forward P/E of just 9.6, which is a 30% discount to its five year historical valuation.
- DD is selling under analysts’ price targets. The median analyst target on DD is $61.50, S&P is at $60 and Credit Suisse has a price target of $62 on DuPont.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DD over the next 72 hours.