When it comes to making money, chemical companies know very well how to do it. Olin (NYSE: OLN) will soon be reporting its third-quarter numbers, and expectations are high after the company beat Street estimates by doubling net income in its second quarter as compared to last year.

Why not take a deeper look into Olin's operations and valuation? Having an idea of the company may help you make better decisions now as well as when its numbers are out.

Strong performance
Olin's core business segment, chlor alkali products, has been doing well since last year. Higher export of products made from chlorine and caustic soda pushed up demand for Olin's chemicals, thus driving up the segment's revenue.

Olin has also hiked prices in both its segments. The mix of high volumes and prices helped Olin's revenue grow by a good 17.7% in the last twelve months. This growth looks all the more significant if we consider how revenue has grown at a compounded average of only 0.7% over the past five years. The company's revenue stands at a solid $1.8 billion today.

Driven by a growing top line, Olin's bottom line has also shown a very impressive jump from 9.9% over the past five years to an awesome 127.3% one-year rate.

Growth plans
Olin has been restructuring and updating some of its operations. These include terminating the use of mercury cell technology in the chlor alkali manufacturing process by the end of 2012, and producing more caustic soda and bleach. There's also a relocation of its ammunition operations in the pipeline. Both of these moves are in progress.

Apart from restructuring, Olin is also investing money in business additions. Early this year, it acquired 100% of a chlor alkali plant after buying a stake from PolyOne (NYSE: POL). It is setting up new facilities to ramp up capacities and production. Olin has also shown interest in expanding business in the New York area.

Growth in Olin's other division, Winchester, which makes ammunition, also seems to be in line. It has recently bagged a five-year contract from the U.S. Army. What's noteworthy is the timing of this contract; budget cut concerns are looming large.

These investments have resulted in a total-debt-to-equity ratio of 59.1%, which seems quite moderate for its industry. Good operating margins and an interest coverage ratio of 6.4 times is comforting for investors as it tells us about Olin's debt servicing capacity.

Value insights
Is Olin looking cheap when compared to its peers? Let's take a look:

Company

Trailing P/E

Forward P/E

P/BV

Olin 15.4 9.5 1.69
Dow Chemical (NYSE: DOW) 12.3 9.4 1.63
PPG Industries (NYSE: PPG) 13.4 11.8 3.28
Georgia Gulf (NYSE: GGC) 10.5 6.2 1.22
Westlake Chemical (NYSE: WLK) 8.5 10.4 1.53

Source: S&P Capital IQ.

Olin might not look like a bargain because of its high trailing P/E. But, note how the forward P/E is dropping off dramatically. Clearly, analysts are expecting solid growth in Olin's earnings in the near future, indicating a possible upside for the stock.

Olin's price-to-book value is in line with peers, and the company also offers a good return on equity for its debt levels, at 23.1%

What you'll love about Olin is its handsome dividend yield of 4%. All you might ask for now is an increase in dividend. If that happens, Olin could be one of your best stock picks.

The Foolish bottom line
Good performance, great plans, and a juicy dividend -- Olin looks like a good bet. The stock has also achieved the coveted five-star ranking in Motley Fool CAPS, the Fool's free investing community. You shouldn't pass on this stock.

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