Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, chemicals producer and waste management service provider Valhi (NYSE: VHI ) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at Valhi's business and see what CAPS investors are saying about the stock right now.
Valhi facts
| Headquarters (Founded) |
Dallas (1932) |
| Market Cap |
$5.6 billion |
| Industry |
Specialty chemicals |
| Trailing-12-Month Revenue |
$1.7 billion |
| Management |
CEO Steven Watson (since 2002)
CFO Bobby O'Brien (since 2002)
|
| Return on Equity (Average, Past 3 Years) |
4.3% |
| Cash/Debt |
$250.6 million / $963.2 million |
| Dividend Yield |
1% |
| Competitors |
DuPont (NYSE: DD )
Huntsman (NYSE: HUN ) |
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 35% of the 79 members who have rated Valhi believe the stock will underperform the S&P 500 going forward. These bears include Clint35 and All-Star MegaShort, who is ranked in the top 5% of our community.
Earlier this month, Clint35 touched on Valhi's seemingly unsustainable valuation:
Way over-valued. Margins aren't very good. FCF from the latest quarter wasn't good. Not enough to cover the dividend, which isn't even that big. Book value is-.76. That's right not even a dollar. ... Have they invented a time machine or something? Come on, the price is crazy.
In fact, Valhi currently sports a lofty P/E of 76. That represents a clear premium to other chemical plays like Dow Chemical (NYSE: DOW ) (19), DuPont (15), and Huntsman (17).
CAPS All-Star MegaShort elaborates on the Valhi bear case:
VHI corporate is not worth much of anything, since sugar and titanium assets are offset by debt. [Waste Control Specialists LLC] (wholly owned subsidiary) has only 144 employees and one large landfill site. WCS lists EnergySolutions, US Ecology, Perma-Fix Environmental Services as key competitors, all of which are worth less than $500M. ...
Additionally VHI subsidiary pension funds are underfunded, and considering their lines of business they are likely to face more environmental lawsuits. Their subsidiaries are also highly cyclical and earnings currently seem to be on the high end of their range, making valuation suspect.
What do you think about Valhi -- or any other stock, for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
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