3 Stocks to Consider Amid Supply Chain Disruptions for Chemical Cos.
Three stocks to consider amid supply chain disruptions for chemical companies.
Chemical Stocks on the Rise Following Recent News
As the industry expands to digital customer experience, mobile devices are becoming increasingly important for interaction. Predictive analytics is being used to gather information, and cloud architectures are being used for computation. This has allowed the industry to migrate to a virtual setting during the pandemic. Producers may increasingly use digital technologies to empower material innovation and expedite low-cost formulations by evaluating, optimizing and assimilating ingredient recipes and domain knowledge.
The chemical industry will need to make significant changes in order to meet global climate goals. In the past, the industry has relied on selling energy-intensive, carbon-based products. However, in order to achieve net-zero carbon emissions in the next 30 years, this business model is no longer sustainable. About 70 global chemical companies have set net-zero or carbon-neutral targets for 2050, which will require immediate and significant work. The industry must take action now to reduce its carbon footprint and move towards more sustainable practices.
The news industry could see increased volume from increased federal infrastructure spending. In November 2021, the bipartisan infrastructure bill consisting of $1.2 trillion in investments across a variety of industries was signed into law. Additionally, demand for news could be driven primarily by continued strength in repair and remodel activity and solid recovery in automotive demand in the near term.
Grading Chemical Stocks: AAII's A+ Stock Grades
The A+ Investor Stock Grades provide a helpful, objective framework for analyzing companies and comparing them in terms of key factors that have been shown by research to be important in identifying market-beating stocks over the long term. These factors include value, growth, momentum, earnings estimate revisions (and surprises) and quality. By taking all of these factors into account, the A+ Investor Stock Grades can give you a better chance of finding stocks that will perform well in the future.
The table below summarizes the attractiveness of three auto and truck manufacturing stocks—Celanese, Eastman Chemical and PPG Industries—based on their fundamentals. Celanese and Eastman Chemical both receive A+ grades, indicating that they are attractive stocks. PPG Industries, on the other hand, receives a C grade, indicating that it is a less attractive stock.
The A+ grade from AAII is a strong indicator that these three chemical stocks are worth investing in. They have all shown consistent growth and have a bright future ahead.
A+ Stocks Reveal What's to Come
Celanese is a global chemical and specialty materials company with a strong focus on innovation and customer service. The company is a leading producer of engineered polymers that are used in a variety of applications, including automotive, medical, industrial, and consumer electronics. Celanese is committed to providing high-quality products and services that meet the needs of its customers and help them succeed.
As a deep value stock, the company's Value Grade of A and Value Score of 85 makes it an attractive investment for those looking for bargain stocks. Companies with higher scores are generally considered to be more attractive to value investors, so this company is definitely worth considering for your portfolio.
Celanese Corporation (NYSE: CE) is a global chemical and specialty materials company that engineers and manufactures a wide variety of products essential to everyday living. Celanese's Value Score ranking is based on several traditional valuation metrics, with the company's rank coming in at 16 for shareholder yield, 22 for the ratio of enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA), and 11 for the price-earnings ratio (with the higher the rank being better for value). The company has a shareholder yield of 4.9%, an enterprise-value-to-EBITDA-ratio of 5.2, and a price-earnings ratio of 5.1. The company's price-to-sales (P/S) ratio of 1.05 translates to a rank of 34. Despite some potential headwinds, Celanese remains a company with a strong balance sheet and a diversified product portfolio that is well-positioned for long-term success.
The Value Grade is an important metric for assessing the attractiveness of a stock's valuation. It is based on the percentile rank of the average of the percentile ranks of various valuation metrics, including the price-to-free-cash-flow (P/FCF) ratio and price-to-book-value ratio (P/B). The rank is scaled to assign higher scores to stocks with the most attractive valuations and lower scores to stocks with the least attractive valuations. This makes the Value Grade a valuable tool for investors looking for stocks that are undervalued by the market.
The earnings estimate revisions offer a glimpse into how analysts feel about a company's short-term prospects. In the case of Celanese, the revisions are relatively neutral, with no major surprises in recent quarters. However, the company's earnings estimates for the current fiscal year have been revised downward slightly over the past month and three months, indicating that some analysts are concerned about the company's long-term prospects.
The Celanese Corporation has disappointed investors with its latest earnings report, which showed a decline compared to the same period last year. This has led to a decrease in the company's stock price, and a decline in the overall consensus estimate for its earnings for the rest of the year.
Celanese is a company that ranks highly in terms of its return on assets (ROA) and bankruptcy risk (Z). The company has a return on assets of 11.3% and a Z-Score of 9.11, which is well above the industry average. The company ranks below the industry median for accruals to assets, return on invested capital (ROIC), change in total liabilities to assets and gross income to assets. However, the company's strong ROA and Z-Score indicates that it is a financially sound company.
Eastman Chemical is a global leader in the production of specialty materials. The company's products are used in a wide range of industries, including transportation, personal care, food and agriculture, building and construction, water treatment, and energy. Eastman Chemical's segments include additives and functional products, advanced materials, chemical intermediates, and fibers. Each segment provides materials with unique properties that offer value-added benefits for customers in specific markets.
This paragraph makes a strong case for investing in higher-quality stocks, which are typically associated with more upside potential and less downside risk. The data backs up this assertion, showing that, on average, stocks with higher quality grades have outperformed those with lower grades over the past two decades. This is a compelling argument for investors to consider quality stocks as part of their portfolios.
I am very impressed with Eastman Chemical's Quality Grade of A with a score of 86. The company's financial position is very strong, with a valid measure and corresponding ranking for at least four of the eight quality measures. I believe that this company is a great investment opportunity and I look forward to seeing its continued success.
Eastman Chemical is a strong company in terms of its buyback yield and change in total liabilities to assets. However, it ranks poorly in terms of its accruals to assets and gross income to assets.
Eastman Chemical's Momentum Score of 47 indicates that it is average in terms of its weighted relative strength over the last four quarters. This score is derived from an above-average relative price strength of 13.4% in the fourth-most recent quarter, offset by a below-average relative price strength of –9.9% in the most recent quarter, –4.5% in the second-most-recent quarter and –8.6% in the third-most-recent quarter. The weighted four-quarter relative price strength is –3.9%, which translates to a score of 47.
Eastman Chemical is a company that is in the good value range, based on its Value Score of 67. The company has a strong shareholder yield of 14.3% and a price-to-earnings (P/E) ratio of 8.9, which rank in the third and 26th percentile, respectively. However, the company has had poor five-year annual sales growth.
PPG Industries is a world-class company with a strong commitment to quality. It ranks highly in terms of its buyback yield, Z-Score and F-Score, and its Quality Grade of A is a testament to its dedication to excellence. PPG Industries is a great company to invest in, and I believe it will continue to thrive in the years to come.
I believe that PPG Industries is a company with good potential. Despite having an average momentum score, the company's weighted four-quarter relative price strength is still positive. I believe that the company is worth investing in for the long term.
Looking at PPG Industries' recent earnings reports, it's clear that the company is facing some challenges. The consensus earnings estimate for full-year 2022 has decreased 7.1% from $6.448 to $5.988 per share, based on 20 downward revisions. This is likely due to the 16 downward revisions to the fourth-quarter estimate over the last month. While PPG Industries reported a positive earnings surprise in the third quarter, it's clear that the company is struggling to maintain that momentum.
PPG Industries has a Value Grade of D, based on its Value Score of 34, which is expensive. However, the company has a Growth Grade of B, based on a score of 65. This indicates that PPG Industries has had strong annual cash from operations over the last five years. Despite its high price-earnings ratio, enterprise-value-to-EBITDA ratio and price-to-book ratio, the company's growth prospects remain strong.
The stocks that meet the criteria of the approach are not necessarily a "recommended" or "buy" list. It is still important to perform due diligence before investing.
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