Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Hunting for a Stock? Go for This One.

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

While tracking the chemicals sector, I came across a company that unfortunately couldn't churn out a robust bottom line in spite of high product prices, or even from passing on costs to consumers.

Huntsman (NYSE: HUN  ) , the company in question, reported flat bottom-line figures in its second quarter. But that doesn't make me bearish about this company that has come up with some restructuring and expansion plans lately. Let's see whether the stock deserves a watchful eye, and if so, what makes it worthy.

Operational performance
Higher input costs but soaring product prices -- it has been an interesting time for Huntsman. The company operates five segments, and most of these have seen good top-line growth, except for its Textile Effects (TE) division, which has been plagued by weak demand and manufacturing constraints.

Nevertheless, overall, Huntsman revenues have grown at an impressive compounded average rate of 21.6%. What is impressive is the jump in this rate from a mere 1.2% in the past half-decade. High selling prices as well as volumes have contributed to the growth.

The chemical player has also done well on the operating-earnings front. Huntsman has come a long way to boast an amazing one-year compounded growth rate of 97%.

Growth plans
Huntsman recently announced an important restructuring plan that could include closing down its TE facilities in Switzerland. This move makes sense, considering that this division has been consistently seeing weak sales. Moreover, a stronger Swiss franc caused a $19 million decline (out of which $10 million was related to the TE division) in the company's second-quarter operating income.

Huntsman also has a keen eye on expansions, especially in emerging markets. It acquired an India-based chemical company this year and has plans of major expansions in the country. It will also be setting up a technology center in Shanghai and expanding key product facility lines in Alabama.

Such aggressive plans should add a lot of value to Huntsman's business.

Huntsman's total-debt-to-equity ratio is too high for my comfort at 187.4%. Its long-term debt stands at $3.9 billion. Though the interest coverage ratio is at 2.6, the cash balance appears a little tight at $683 million. Moreover, the company has also been repurchasing shares and has a high dividend payout ratio of 36.8%. These add to the pressure on cash balances.

Value insights
Let's take a look at how Huntsman's valuation stacks up next to its peers.


Trailing P/E

Forward P/E


Huntsman 9.7 6.0 1.19
DuPont (NYSE: DD  ) 16.5 9.9 3.34
Dow Chemical (NYSE: DOW  ) 11.3 8.4 1.50
Kronos Worldwide (NYSE: KRO  ) 9.8 5.9 2.54
Ashland (NYSE: ASH  ) 16.5 9.7 0.81

Source: Capital IQ, a division of Standard & Poor's.

Huntsman's lowest trailing P/E shows how cheap the stock is compared with its peers. What's even more interesting is the lower forward P/E, indicating how earnings are expected to grow in the future. If you look carefully, it seems the entire industry is expected to do well, with the forward P/E for every peer coming in lower than the trailing ones. This definitely means there could be good upside potential for the stock in the future, as expected earnings growth hasn't really been factored in its price yet.

On a price-to-book value basis, too, the company looks cheaper than most of its peers. Huntsman's return on equity is also a decent 15.1%, and even more impressive is its strong 3.8% dividend yield.

The Foolish bottom line
With its strong operational growth, sensible restructuring moves, and relatively cheap valuations, Huntsman does look like a value pick. What's more, the stock just hit its 52-week low of $9.88, after getting hammered by 31% on the day its second-quarter results were announced. Not a bad time to get in, is it?

Stay updated on the company's news and analysis by adding it to your stock Watchlist.

Fool contributor Neha Chamaria owns no shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1563624, ~/Articles/ArticleHandler.aspx, 10/21/2016 5:49:04 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 -4.58 -0.09%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/20/2016 4:02 PM
ASH $112.31 Down -0.73 -0.65%
Ashland CAPS Rating: *****
DD $69.46 Down -0.07 -0.10%
DuPont CAPS Rating: ****
DOW $53.82 Down -0.11 -0.20%
The Dow Chemical C… CAPS Rating: *****
HUN $16.48 Up +0.26 +1.60%
Huntsman CAPS Rating: **
KRO $7.96 Up +0.18 +2.31%
Kronos Worldwide CAPS Rating: ***