Despite the current macroeconomic volatility, the chemical industry remains a significant contributor to the global economy, given its widespread demand, and is expected to continue evolving amid innovations. To that end, investors could benefit from fundamentally strong chemical stocks Nitto Denko Corporation (NDEKY), CSW Industrials, Inc. (CSWI), and Orion S.A. (OEC).
The chemical sector benefits from being tightly linked with several other industries. The chemistry business is linked with 96% of all manufactured goods, supporting industries such as automotive, agriculture, healthcare, construction, textiles and apparel, and electronics. Therefore, speeding up innovation in the chemical industry arguably fuels advancements in many other sectors.
Amid a rapidly evolving world with the need for sustainable solutions, digitalization has scaled up the operations of chemical companies. Moreover, cloud-based platforms have reinvented the chemical industry by automating data analytics and optimizing spend.
Additionally, the global chemicals market is expected to grow to $6.37 trillion in 2026 at a CAGR of 8.4%.
Given these factors, investors could look to buy the featured chemical stocks. Let’s take a closer look at their fundamentals.
Nitto Denko Corporation (NDEKY)
Headquartered in Osaka, Japan, NDEKY primarily engages in the adhesive tapes business. The company offers its products to automotive and transportation, housing/housing equipment, infrastructure, material, home appliance and electrical, display, electronic device, medical, packaging, and consumer/personal care industries.
In terms of the trailing-12-month levered FCF margin, NDEKY’s 7.54% is 112.3% higher than the 3.55% industry average. Its 9.46% trailing-12-month return on total assets is 102.1% higher than the industry average of 4.68%. Likewise, its 11.75% trailing-12-month net income margin is 65% higher than the 7.12% industry average.
NDEKY’s revenue increased 8.9% year-over-year to ¥929.04 billion ($6.61 billion) for the fiscal year that ended March 31, 2023. Its gross profit increased 11.6% year-over-year to ¥337.44 billion ($2.40 billion). The company’s net income increased 12.4% year-over-year to ¥109.26 billion ($777.12 million). Also, its net EPS came in at ¥738.48, representing a 12.6% increase over the prior-year quarter.
Over the past nine months, NDEKY has gained 32.3% to close the last trading session at $35.54
NDEKY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Chemicals industry, it is ranked #5 of 85 stocks. The stock has an A grade for Quality and a B for Value and Stability. Click here to see the additional ratings of NDEKY for Momentum, Growth, and Sentiment.
CSW Industrials, Inc. (CSWI)
CSWI operates as a diversified industrial company in the United States and internationally. It operates through three segments: Contractor Solutions; Engineered Building Solutions; and Specialized Reliability Solutions.
In terms of the trailing-12-month levered FCF margin, CSWI’s 11.04% is 110.5% higher than the 5.24% industry average. Its 12.72% trailing-12-month net income margin is 100.5% higher than the industry average of 6.35%. Likewise, its 18.34% trailing-12-month EBIT margin is 88.4% higher than the 9.73% industry average.
CSWI’s EBITDA for the fiscal fourth quarter ended March 31, 2023, increased 32.8% year-over-year to $49.39 million. Its adjusted net income increased 46.7% year-over-year to $27.06 million, and its adjusted net EPS attributable to CSWI came in at $1.74, representing a 48.7% increase over the prior-year quarter.
CSWI’s EPS and revenue estimates for the quarter ending September 30, 2023, are expected to increase 15.3% and 8.6% year-over-year to $1.81 and $207.60 million, respectively. It has a commendable earnings surprise history, surpassing its consensus EPS estimates in two of the trailing four quarters. Over the past nine months, CSWI has gained 33.4% to close the last trading session at $158.18.
CSWI’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. It is ranked #8 in the same industry. It has an A grade for Sentiment and a B for Momentum and Quality. We have also given CSWI grades for Growth, Value, and Stability. Get all CSWI ratings here.
Orion S.A. (OEC)
Headquartered in Senningerberg, Luxembourg, OEC manufactures and sells carbon black products in Luxembourg and internationally. It operates in two segments: Specialty Carbon Black and Rubber Carbon Black.
In terms of the trailing-12-month Return on Common Equity, OEC’s 27.67% is 159.1% higher than the 10.68% industry average. Its 10.63% trailing-12-month return on total capital is 73.8% higher than the 6.12% industry average. Likewise, its 10.48% trailing-12-month CAPEX/Sales is 65.3% higher than the industry average of 6.34%.
OEC’s adjusted EBITDA for the fiscal first quarter ended March 31, 2023, increased 21.5% year-over-year to $101.10 million. Its adjusted net income increased 30.7% year-over-year to $45.10 million. The company’s gross profit increased 15.7% year-over-year to $136.40 million, and its net EPS came in at $0.74, representing a 29.8% increase over the prior-year quarter.
OEC’s EPS and revenue for the fiscal quarter ending September 30, 2023, are expected to increase 7.6% and 1.4% year-over-year to $0.61 and $550.67 million, respectively. It has an impressive earnings surprise history, surpassing its consensus EPS estimates in three of the trailing four quarters. Over the past nine months, OEC has gained 63.4% to close the last trading session at $21.86.
OEC’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. It is ranked #7 in the Chemicals industry. It has a B grade for Value and Quality. Click here to see the other ratings of OEC for Growth, Momentum, Stability, and Sentiment.
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NDEKY shares were trading at $35.58 per share on Wednesday morning, up $0.04 (+0.12%). Year-to-date, NDEKY has gained 23.84%, versus a 17.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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