Sometimes, when someone is looking for investment ideas and scanning stock screeners, a few companies stand out among their peers in peculiar ways. The Chemours Company (CC -0.69%) is one of those peculiar oddities. Its stock trades at a deep discount to its chemical manufacturing peers, and it's one of the few companies in this industry with a dividend yield above 3%. Moreover, it has a portfolio of specialty chemicals aligned with many long-term global growth trends. 

Sounds too good to be true, right? Perhaps, but there is something that the market doesn't like about this stock. So let's take a closer look at Chemours to see why Wall Street is shunning this industrial stock and whether that makes it a contrarian stock to buy.

A compelling portfolio and stellar performance

Chemours is a rather young company, but its roots go much further back as a part of DuPont de Nemours (DD -0.53%). The company was spun off in 2015 and has three primary manufacturing divisions: titanium dioxide, refrigerants and propellants, and fluoropolymers, which are better known by their brand names, such as Teflon. These chemicals are used in a wide range of products and end markets. For example, titanium dioxide is a white pigment and UV-ray blocker commonly found in paints, dyes, sunscreen, and plastics. 

Titanium dioxide is a rather mature industry that is pretty sensitive to economic cycles, but it is a highly consolidated industry with decent margins and doesn't require much capital investment. It has been a cash engine for Chemours to invest in its other divisions and reward shareholders. Chemours' refrigerant business is compelling because it has created a lower potential greenhouse-warming gas for air conditioners and other refrigeration needs that hit a lot of growth trends: growing residential air conditioning, commercial cooling demand for data centers, and global chemical regulations pushing toward lower potential greenhouse-warming chemicals for refrigeration.

Furthermore, its fluoropolymers division has the number one or number two market position for 12 different industries, including high-growth sectors such as electronic components, industrial coatings, and fuel cell membranes.

Since going public, the company has produced some rather impressive financial results. Since 2015, it has more than doubled its earnings per share and currently has a return on invested capital of 18%. It carries quite a bit of debt on its balance sheet (debt to capital is 73%), but it also has about $1.1 billion in cash and has been chipping away at that debt balance. In addition, it pays a decent dividend and has retired about 15% of shares outstanding since going public.

Together, these points would suggest Chemours is a company worth an investment; its current valuation of five times earnings suggests you could get it on the cheap.

The big risk

Based on its financial performance, it seems silly for DuPont to have spun off Chemours into its own entity. I'm sure management talked at the time about "unlocking value" or "freeing up these businesses to make better capital decisions." But alongside those businesses were some potentially massive environmental liabilities.

The most notable of these liabilities relates to contamination from what are commonly referred to as PFAS. These chemicals break down incredibly slowly in the environment and typically require active cleanup to remove them. According to Bloomberg Law, total PFAS liabilities for just one company, 3M, could reach $30 billion. Chemours had significant liabilities as the original spin-off agreement left Chemours covering much of DuPont's legacy liabilities. 

Chemours and DuPont have subsequently agreed to share PFAS-related costs up to $4 billion over the next 20 years and have set up a $1 billion escrow account to cover expenses for these cases. 

You don't have to do a lot of math to conclude that $2 billion in litigation and cleanup expenses is an overwhelming chunk of cash for a $4 billion company. There is even the possibility that PFAS litigation costs could increase from there. Over the past two years, there has been a significant uptick in lawsuits filed related to PFAS. 

Is it worth it?

Any investment today is betting that the company is either not going to get hit too hard by PFAS liabilities or is in a good enough financial position to handle whatever liabilities are awarded. 

Chemours has, so far, been able to generate solid financial results. It has also done this while contributing to the escrow fund for future liabilities. So if the spending rate for PFAS liabilities remains steady, then Chemours could be okay. That's a big if, though, with more and more cases being filed recently. 

If Chemours can drastically improve its balance sheet and prepare the business for a big financial hit, it is a company worth revisiting. For now, though, Chemours stock remains risky enough that it is probably worth staying away from for some time.