Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Chemicals - Commodity Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Chemicals - Commodity industry for Monday, May 20, 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.

Arkema SA - ADR’s Value Grade

Value Grade:

Arkema SA is a France-based chemical producer, which provides specialty chemicals and advanced materials. The Company manufactures a range of products for industries, including construction, packaging, chemical, automotive, electronics, food, and pharmaceutical industries. The Company operates through five business segments: Advanced materials that includes high performance polymers, specialty surfactants, molecular sieves, organic peroxides, oxygenates, etc. ; Adhesives that includes sealants, adhesives for floors and tiles, waterproofing products, etc.; Coating solutions that include resins, emulsions for adhesives, surface coating products, absorbents, etc.; Intermediate products that include thermoplastic polymers (PMMA) polymethyl methacrylate, acrylic products, fluorinated gases, etc.; And Other. The Company has production centers located in Europe, North America and Asia. It operates through a network of subsidiaries, such as XL Brands.

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.

Arkema SA - ADR has a Value Score of 68, which is considered to be undervalued.

When you look at Arkema SA - ADR’s price-to-sales ratio at 0.77 compared to the industry median at 1.02, this company has a lower price relative to revenue compared to its peers. This could make Arkema SA - ADR’s stock more attractive for value investors.

Arkema SA - ADR’s price-earnings ratio is 22.37 compared to the industry median at 21.72. This means it has a higher share price relative to earnings compared to its peers. This could make Arkema SA - ADR less attractive for value investors.

Now, let’s assess Arkema SA - ADR’s EV/EBITDA ratio, also known as enterprise multiple. At 6.4, when compared to the industry median of 11.0, 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.

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. Arkema SA - ADR’s price-to-book ratio is lower than its industry median ratio of 2.26. This could make Arkema SA - ADR more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Arkema SA - ADR’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Arkema SA - ADR’s price-to-free-cash-flow ratio is higher than its industry median ratio of 16.83. This could make Arkema SA - ADR less attractive because the higher P/FCF ratio indicates that Arkema SA - ADR 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.

Deswell Industries, Inc.’s Value Grade

Value Grade:

Deswell Industries, Inc. is engaged in the manufacturing and selling of injection-molded plastic parts and components. The Company also provides manufacturing services for electronic products and subassemblies, and manufactures metallic molds and accessory parts for original equipment manufacturers (OEMs) and contract manufacturers. Its segments include plastic injection molding and electronic products assembling. It produces a range of plastic parts and components that are used in the manufacture of consumer and industrial products, using various plastic injection technologies, such as film injection, integrated injection and insert injection. Its products include plastic components of electronic entertainment products; cases for flashlights, telephones, paging machines, projectors and alarm clocks; toner cartridges and cases for photocopy and printer machines; parts for electrical products, such as air-conditioning and ventilators; laser key caps, and automobile components.

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.

Deswell Industries, Inc. has a Value Score of 99, which is considered to be undervalued.

Deswell Industries, Inc.’s price-earnings ratio is 6.3 compared to the industry median at 21.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Deswell Industries, Inc. more attractive for value investors.

Deswell Industries, Inc.’s price-to-book ratio is higher than its peers. This could make Deswell Industries, Inc. less attractive for value investors when compared to the industry median at 2.26.

You can read more about Deswell Industries, Inc.’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.

Plastec Technologies Ltd’s Value Grade

Value Grade:

Plastec Technologies, Ltd. is a holding company. The Company is a vertically integrated plastic manufacturing services provider. It operates through the provision of integrated plastic manufacturing services segment. It provides precision plastic manufacturing services from mold design and fabrication and plastic injection manufacturing to secondary-process finishing, as well as parts assembly through its subsidiary, Plastec International Holdings Limited. It produces a range of plastic casings, components and utensils. Its secondary-process finishing services include smoothing and polishing, laser marking, silk-screening, pad printing, spraying, painting, ultra-violet coating, anti-fog coating, hot stamping and metallic coating. Its customers include original equipment manufacturers, original design manufacturers and original brand manufacturers of consumer electronics, electrical home appliances, telecommunication devices, computer peripherals and precision plastic toys.

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.

Plastec Technologies Ltd has a Value Score of 72, which is considered to be undervalued.

Plastec Technologies Ltd’s price-to-book ratio is higher than its peers. This could make Plastec Technologies Ltd less attractive for value investors when compared to the industry median at 2.26.

You can read more about Plastec Technologies Ltd’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.

Trinseo PLC’s Value Grade

Value Grade:

Trinseo PLC is a specialty material solutions provider. The Company’s segments include Engineered Materials, Latex Binders, Plastics Solutions, Polystyrene, Feedstocks, and Americas Styrenics. The Engineered Materials segment consists of rigid thermoplastic compounds and blends products, and soft thermoplastic products. The Latex Binders segment produces styrene-butadiene latex (SB latex) and other latex polymers and binder’s applications, such as adhesive and the technical textile paper market. The Plastics Solutions segment includes acrylonitrile-butadiene-styrene, styrene-acrylonitrile, and polycarbonate businesses. The Polystyrene segment includes a variety of general-purpose polystyrenes and polystyrene that has been modified with polybutadiene rubber. The Feedstocks segment includes its production and procurement of styrene monomer outside of North America. The Americas Styrenics segment is a producer of both styrene monomer and polystyrene 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.

Trinseo PLC has a Value Score of 69, which is considered to be undervalued.

You can read more about Trinseo PLC’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 4 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.

• Arkema SA - ADR stock has a Value Grade of B.
• Deswell Industries, Inc. stock has a Value Grade of A.
• Plastec Technologies Ltd stock has a Value Grade of B.
• Trinseo PLC stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Chemicals - Commodity Stocks for Monday, May 20
• 3 Undervalued Chemicals - Commodity Stocks for Friday, May 17
• 3 Undervalued Chemicals - Commodity Stocks for Thursday, May 16
• Why Kronos Worldwide, Inc.’s (KRO) Stock Is Up 4.09%

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