A Beaten Down Materials Stock With Heavy Insider Buying

May.30.12 | About: Kraton Performance (KRA)

The Energy & Materials sector finally had a good day on Tuesday after several dismal weeks. One stock in the materials sector that looks good based on valuation and insider buying is Kraton Performance Polymers (NYSE:KRA), which is down some 30% over the past couple of months.

"Kraton Performance Polymers engages in the development, production, and marketing of styrenic block copolymers (SBCs) and non-SBC products worldwide" (Business description from Yahoo Finance)

6 reasons Kraton looks solid at $21 a share:

  • KRA is selling near the bottom of its five year valuation range based on P/E, P/CF, P/B and P/S.
  • Insiders have made net purchases of just under 80,000 in May.
  • The stock sells for just over 6 times forward earnings, a discount to its five year average (8.9)
  • KRA is considerably under consensus price targets. The 9 analysts that cover the stock have a median price target of $31 on Kraton.
  • The market seems to be discounting the company's growth prospects given its five year projected PEG (.66).
  • Analysts expect between 8% and 12% revenue growth from the company in FY2012 and FY2013. The stock also appears cheap at just 44% of sales and just 20% over book value.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in KRA over the next 72 hours.