Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Chemicals - Commodity industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Chemicals - Commodity Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Chemicals - Commodity Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Chemicals - Commodity industry for Monday, May 06, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Chemicals - Commodity industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Koppers Holdings Inc.’s Value Grade

Value Grade:

Koppers Holdings Inc. is an integrated global provider of treated wood products, wood preservation chemicals and carbon compounds. The Company operates through three segments: Railroad and Utility Products and Services (RUPS), Performance Chemicals (PC) and Carbon Materials and Chemicals (CMC). Its RUPS segment sells treated and untreated wood products, rail joint bars and services primarily to the railroad markets in the United States and Canada and treated wood products and services to the utility markets. Its PC segment develops, manufactures, and markets wood preservation chemicals and wood treatment technologies and services to a diverse range of end markets including infrastructure, residential and commercial construction, and agriculture. The Company's CMC segment is primarily a manufacturer of creosote, carbon pitch, naphthalene, phthalic anhydride, and carbon black feedstock. The Company has manufacturing capabilities in North America, South America, Australasia, and Europe.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Koppers Holdings Inc. has a Value Score of 62, which is considered to be undervalued.

When you look at Koppers Holdings Inc.’s price-to-sales ratio at 0.43 compared to the industry median at 0.97, this company has a lower price relative to revenue compared to its peers. This could make Koppers Holdings Inc.’s stock more attractive for value investors.

Koppers Holdings Inc.’s price-earnings ratio is 10.59 compared to the industry median at 19.59. This means it has a lower share price relative to earnings compared to its peers. This could make Koppers Holdings Inc. more attractive for value investors.

Now, let’s assess Koppers Holdings Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 7.4, when compared to the industry median of 10.9, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Koppers Holdings Inc.’s shareholder yield is lower than its industry median ratio of 0.74%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Koppers Holdings Inc.’s price-to-book ratio is lower than its industry median ratio of 2.27. This could make Koppers Holdings Inc. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Koppers Holdings Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Koppers Holdings Inc.’s price-to-free-cash-flow ratio is higher than its industry median ratio of 14.38. This could make Koppers Holdings Inc. less attractive because the higher P/FCF ratio indicates that Koppers Holdings Inc. is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Methanex Corp (USA)’s Value Grade

Value Grade:

Methanex Corporation is a Canada-based producer and supplier of methanol to international markets. The Company supplies methanol to international markets in North America, Asia Pacific, Europe, and South America. Its operations consist of the production and sale of methanol, a commodity chemical. It operates production sites in Canada, Chile, Egypt, New Zealand, Trinidad and Tobago and the United States. It has three plants in New Zealand, Motunui 1, Motunui 2 and Waitara Valley. Its two plants in Geismar serve customers in methanol markets. It has two plants in Trinidad, Titan and Atlas that supplies methanol to various methanol markets. Its Chile production site supplies methanol to customers in South America and Asia Pacific, having two plants in Chile, Chile I and Chile IV. Its Egypt plant is located on the Mediterranean Sea and primarily supply methanol to the domestic and European market. Its plant in Medicine Hat, Alberta, supplies methanol to customers in North America.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Methanex Corp (USA) has a Value Score of 67, which is considered to be undervalued.

Methanex Corp (USA)’s price-earnings ratio is 19.5 compared to the industry median at 19.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Methanex Corp (USA) more attractive for value investors.

Methanex Corp (USA)’s price-to-book ratio is higher than its peers. This could make Methanex Corp (USA) less attractive for value investors when compared to the industry median at 2.27.

You can read more about Methanex Corp (USA)’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Westlake Chemical Partners LP’s Value Grade

Value Grade:

Westlake Chemical Partners LP is a limited partnership formed by Westlake Corporation to operate, acquire, and develop ethylene production facilities and other qualified assets. The Company’s business and operations are conducted through Westlake Chemical OpCo LP (OpCo). OpCos assets consist of three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana, and an ethylene pipeline. The ethylene production facilities primarily convert ethane into ethylene and have an aggregate annual capacity of approximately 3.7 billion pounds, and a 200-mile ethylene pipeline. It owns two ethylene production facilities at Westlake's Lake Charles, Louisiana site (Petro 1 and Petro 2, collectively Lake Charles Olefins), with an annual combined capacity of approximately 3.0 billion pounds. The Company owns one ethylene production facility at Westlake's Calvert City, Kentucky site (Calvert City Olefins), with an annual capacity of approximately 730 million pounds.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Westlake Chemical Partners LP has a Value Score of 94, which is considered to be undervalued.

Westlake Chemical Partners LP’s price-earnings ratio is 14.4 compared to the industry median at 19.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Westlake Chemical Partners LP more attractive for value investors.

Westlake Chemical Partners LP’s price-to-book ratio is higher than its peers. This could make Westlake Chemical Partners LP less attractive for value investors when compared to the industry median at 2.27.

You can read more about Westlake Chemical Partners LP’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Chemicals - Commodity Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Chemicals - Commodity stocks as well as other industrys.

Choosing Which of the 3 Best Chemicals - Commodity Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Koppers Holdings Inc. stock has a Value Grade of B.
• Methanex Corp (USA) stock has a Value Grade of B.
• Westlake Chemical Partners LP stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Chemicals - Commodity industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Chemicals - Commodity Stocks

Want to learn more about Chemicals - Commodity stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Chemicals - Commodity Stocks for Monday, May 06
• 3 Undervalued Chemicals - Commodity Stocks for Friday, May 03
• What You Need to Know About Koppers Holdings Inc.'s Q1 Earnings
• Why Braskem SA (ADR)’s (BAK) Stock Is Up 4.76%

AAII Disclaimer

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