Monday, August 25, 2014

Seeking Alpha: KMG Chemicals Really Needs That New Leg Of Growth Now

I had mixed feelings about KMG Chemicals (NYSE:KMG) back in January and the shares have chopped around quite a bit since then, though they're up about 8% from that January starting point. Seven months later, I still can't get all that bullish (or bearish) about these shares.

I know many sell-side analysts are cooling on the semiconductor space (and the company generates about 60% of segment profits from high-purity chemicals) and I am concerned about the likely shrinkage in the wood treatment business. On the other hand, the company seems to be producing pretty good synergies from the UPC acquisition (which it acquired from OM Group (NYSE:OMG)) and I think management will be able to harvest cash from the wood treatment business for some time yet. The real key for me, then, is what the company does to augment its revenue - management has talked about adding a third business for some time now and I don't think there should be a shortage of opportunities. KMG Chemicals looks undervalued already and with the right deal, maybe more of that value makes it into the share price.

Read more here:
KMG Chemicals Really Needs That New Leg Of Growth Now

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