After looking at Motley Fool Income Investor recommendation Dow Chemical (NYSE:DOW) closely, I just had to conclude that it's downright cheap.

What piqued my interest Wednesday morning was a Reuters story about a Citigroup (NYSE:C) chemicals conference Tuesday, where Dow's CEO said 2007 "looked solid."

I have covered the oversized profits the company has been reporting. Ah, you say, but this is a cyclical company. Yes, it is. But unless you are looking for a worldwide recession really soon, you might want to take notice of Dow's earnings projections.

Furthermore, anticipated tightening of the supply/demand balance, limited capacity additions on the industry as a whole, and sustained demand growth lend themselves to favorable pricing conditions. Then consider that the company intends to invest in overseas capacity as a means of making itself a low-cost producer.

Analysts expect Dow to grow earnings by 8% annually for the next five years. Before saying "low growth" and heading to the next Motley Fool article, consider that the stock is trading for 9.8 times earnings -- and 8.3 times projected 2006 earnings -- and pays a healthy 3% dividend. That holds the possibility of market-beating returns if Berkshire Hathaway's (NYSE:BRKa) (NYSE:BRKb) Warren Buffett is correct in expecting market growth rates to moderate to 6% or so.

Dow is a truly international company. In 10 years, international sales grew from 12% of total sales to 63% for 2004. Dow is gushing cash, too. Earnings before interest and taxes (EBIT) went from 10.5% of sales in the first nine months of 2004 to 14.8% for the same period this year. Since revenue was $34.4 billion for the latest nine months, that improvement in EBIT equates to $2 billion in the bank. That's a lot of greenbacks.

Dow also compares favorably with other chemical companies. Because chemical companies are capital-intensive, they carry a lot of debt. For that reason, they are compared based on enterprise value, which is market capitalization plus debt. Dow sells for 6.3 times enterprise value to EBITDA (EBITDA being EBIT minus depreciation and amortization). Competitor DuPont (NYSE:DD) trades at nine times that factor, and Lyondell Chemicals (NYSE:LYO) goes for 6.8 times.

So as you eye things, you'd do well to note that the old boom-bust cycle caused by massive industry building and volatility in input materials doesn't seem so evident at this time, and as I said before, Dow looks pretty cheap.

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Fool contributor W.D. Crotty owns shares in Berkshire Hathaway. Click here to see The Motley Fool's disclosure policy.