The Materials Sector has had a rocky few months as concerns about slowing worldwide growth and the contraction currently going on in Europe has negatively impacted stock price performance across the board. Some material stocks have pulled back even as consensus earnings estimates have gone up. One cheap, under covered stock (no focused articles on SA) is a stock that has only been public for a few years, Chemtura (CHMT), is in that category.
"Chemtura Corporation , together with its subsidiaries, engages in the manufacture and sale of specialty chemical solutions and consumer products worldwide." (Business description from Yahoo Finance)
7 reasons CHMT is undervalued at just over $14 a share:
- The stock is selling near the bottom of its historical valuation range based on P/B, P/S and P/CF. A director bought 10,000 shares at higher prices in March.
- Earnings are nicely marching higher. CHMT made $1.12 a share in FY2011 but is projected to make $1.52 a share in FY2012 and a $1.97 in FY2013.
- The company has beat earnings estimates the last two quarters and sells at just over 7 times earnings.
- Chemtura almost quadrupled operating cash flow from FY2009 to FY2011 and the stock sells at 7 times operating cash flow.
- Consensus earnings estimates for both FY2012 and FY2013 have risen nicely over the last three months even as the stock has pulled back some 20%.
- The company is well diversified by product line and geographically by revenues. Analysts expect between 4% to 8% sales growth both in FY2012 and FY2013 and CHMT has a very low five year projected PEG (.26).
- The stock looks like it is trying to put in a short term technical bottom here (See Chart)
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CHMT over the next 72 hours.