Calumet Specialty Products (NASDAQ:CLMT) is in the midst of a turnaround led by a CEO who has rescued the company from insolvency, and units are set to surge by 130%, according to Bill Chen of Rhizome Partners.
CLMT is essentially in year three of a turnaround situation, as new management has cut $140M of cost out of a $300M EBITDA business and "re-focused capital allocation away from mindless capital-intensive refinery acquisitions and toward branded and IP-rich products with one-to-two-year payback periods," Chen writes.
Chen likes CLMT's capital structure that is ~4x debt and 2x market cap, which he says translates into a free cash flow yield of 23% that should improve as the company pays down debt.
Cehn thinks the market will start to view CLMT as a sustainable specialty chemicals business in the long run.
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