Olin Corp. reported its fourth-quarter and full-year 2016 earnings last night, and it beat by the proverbial penny. Expected to deliver $0.09 per share on $1.36 billion in sales, Olin reported a $0.10 profit and $1.39 billion in revenue.
These profits still weren't enough to put Olin in the black for the year as a whole, however. For the year, Olin reported sales of $5.55 billion and a $0.02-per-share loss.
Now, all that being said, even Olin's full-year results weren't as bad as they may appear on the surface. While it's true the company incurred a $3.9 million loss for the year, it generated positive cash flow from operations of $603 million. Minus capital expenditures of $278 million, that left the company with $325 million in cash profits -- free cash flow -- for the year.
But is this good enough to make the stock a buy?
Management did not include guidance for the current year in its earnings report. At a $4.83 billion market capitalization, however, Olin Corp. stock currently sells for nearly 14.9 times trailing free cash flow. Weighed against the company's 3.1% dividend yield and analysts' 8% projected long-term growth rate (11.1% total projected return), 14.9 times free cash flow seems like a steep valuation on the stock. When you factor its $3.4 billion net debt load into the mix, Olin Corp. looks even more overpriced -- and less buyable.
My advice: Yesterday's earnings beat and the improved stock price it has spawned present an excellent opportunity for Olin shareholders to exit the stock and lock in the 61% profit their shares have enjoyed over the past year.
More from The Motley Fool
Is Now the Time for Olin to Sell Its Winchester Ammunition Business?
The specialty chemicals maker should be focusing on its chlor alkali business.
Olin Stock's Fantastic Run in 2016 Was Way Too Much
Olin's not all bad -- but its debt load is bad enough.
Why Smith & Wesson and Sturm, Ruger Stocks Sank in November
Bad news for gun control could be bad news for gun stocks, too.