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 Wednesday, August 07, 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 77, which is considered to be undervalued.

When you look at Arkema SA - ADR’s price-to-sales ratio at 0.63 compared to the industry median at 0.86, 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 18.23 compared to the industry median at 18.95. This means it has a lower share price relative to earnings compared to its peers. This could make Arkema SA - ADR more 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 10.5, 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 2.06. 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 lower than its industry median ratio of 19.55. This could make Arkema SA - ADR more attractive because the lower 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.

Gulf Resources, Inc.’s Value Grade

Value Grade:

Gulf Resources, Inc. is a holding company. The Company manufactures and trades bromine and crude salt; manufactures and sells chemical products used in oil and gas field exploration, oil and gas distribution, oil field drilling, wastewater processing, papermaking chemical agents and inorganic chemicals, and manufactures and sells materials for human and animal antibiotics. The Company operates in three segments: bromine, crude salt and chemical products. Crude salt is the principal material in alkali production, as well as chlorine alkali production and is used in the chemical, food and beverage, and other industries. Its Chemical products include Hydroxyl guar gum, Demulsified agent, Corrosion inhibitor for acidizing, Bactericide, Iron ion stabilizer, Flocculants agent, Bromopropane, Solid lubricant, Polyether lubricant and Chlorantraniliprole. Its production sites are located in the Shandong Province in northeastern China.

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.

Gulf Resources, Inc. has a Value Score of 98, which is considered to be undervalued.

Gulf Resources, Inc.’s price-to-book ratio is higher than its peers. This could make Gulf Resources, Inc. less attractive for value investors when compared to the industry median at 2.06.

You can read more about Gulf Resources, 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.

Olin Corp’s Value Grade

Value Grade:

Olin Corporation is a vertically integrated global manufacturer and distributor of chemical products and a manufacturer of ammunition. The Company operates through three segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The Chlor Alkali Products and Vinyls segment manufactures and sells chlorine and caustic soda, ethylene dichloride and vinyl chloride monomer, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, hydrochloric acid, hydrogen, bleach products and potassium hydroxide. The Epoxy segment produces and sells a full range of epoxy materials and precursors, including aromatics (acetone and phenol), allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and systems and growth products, such as converted epoxy resins and additives. The Winchester segment produces and sells sporting ammunition, reloading components, small caliber military ammunition and components, industrial cartridges and clay targets.

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.

Olin Corp has a Value Score of 72, which is considered to be undervalued.

Olin Corp’s price-earnings ratio is 18.3 compared to the industry median at 19.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Olin Corp more attractive for value investors.

Olin Corp’s price-to-book ratio is lower than its peers. This could make Olin Corp more attractive for value investors when compared to the industry median at 2.06.

You can read more about Olin Corp’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.

• Arkema SA - ADR stock has a Value Grade of B.
• Gulf Resources, Inc. stock has a Value Grade of A.
• Olin Corp stock has a Value Grade of B.

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 Wednesday, August 07
• What You Need to Know About Westlake Chemical Partners LP's Q2 Earnings
• What You Need to Know About Westlake Corp's Q2 Earnings
• Why Mativ Holdings Inc’s (MATV) Stock Is Down 5.63%

AAII Disclaimer

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