Since I last wrote about Balchem (BCPC 0.85%), several key developments have come to light, which only serve to strengthen the chemical manufacturer as an investment. With a significant dividend raise and an increasing presence in Canada, Balchem has positioned itself to remain one of the best high-growth investments in the chemicals industry.
Industry-leading growth
Comparing a small-cap like Balchem to an industry behemoth like Dow Chemical (DOW +0.00%) is beneficial to show the true power of small-cap growth. However, to gain a better perspective of Balchem's growth, it is helpful to also analyze the company alongside peers of similar size. The following is a breakdown of the company's projected growth for 2014 compared to Dow Chemical as well as smaller competitors Innophos (IPHS +0.00%) and Stepan (SCL 0.08%).
|
Balchem |
Dow |
Innophos |
Stepan | |
|---|---|---|---|---|
|
Revenue Growth 2014 |
13.5% |
4% |
5.4% |
6.8% |
|
EPS Growth 2014 |
21.6% |
24% |
35% |
23.8% |
The first major takeaway from the data above is that Balchem is the only listed chemical company projected to grow revenue at a rate greater than 10% in 2014. This is impressive, considering Balchem is expected to finish fiscal 2013 having grown sales 10.7%, which indicates above-average revenue growth is the norm for the company.
Even though Balchem is expected to grow earnings per share the slowest out of all listed competitors, the results are not as disappointing as they may seem at first. Innophos and Stepan are coming off particularly bad fiscal years, as both are expected to end 2013 with a decline in earnings per share.
On the other hand, Balchem is expected to finish 2013 having grown earnings per share 12.1%. Still, Dow Chemical is the best with regard to growing earnings, as it is the only company expected to grow revenue more than 20% in both 2013 and 2014.
New announcements
The first piece of news was an announcement made by management that Balchem was increasing its annual dividend. The company raised its dividend an impressive 18%, from $0.22 to $0.26.
This increase follows in a long line of dividend raises at Balchem, as the company has now increased its dividend nine times in the last 10 years. Even more impressive is that Balchem has an annual dividend growth rate of 32.4% for the last decade.
Balchem Chairman, President, and CEO Dino Rossi explained, "This annual dividend recognizes the company's strong financial performance and its commitment to share near-term successes with our shareholders."
The second piece of news was the expansion of Balchem's partnership with Versus Animal Nutrition, a provider of animal nutrient products and related services. Versus has typically serviced consumers in Western Canadian markets but is now on track to service consumers across the whole country.
As a provider of Balchem's precision release chemicals for feed animals, including AminoShure-L, KeyShure Minerals, and ReaShure, the significant expansion of Versus' distribution means an increasing global footprint for Balchem.
The director of Balchem's ruminant business, Jonathan Griffin, explained, "This expanded alliance will give the feed industry across Canada better access to Balchem's research, technical support and advanced product technologies."
Part of a strong growth story
These two new drivers of growth for Balchem fit in well with the company's larger growth strategy. With management's stated goals to continue increasing the acceptance of the company's signature products as well as exploring new opportunities through future acquisitions and alliances, Balchem appears well on its way to delivering top-of-the-line growth in the chemicals industry.
