Thursday, June 18, 2015

Seeking Alpha: KMG Chemicals Unlocking Its Potential

I liked small specialty chemical company KMG Chemicals (NYSE:KMG) back in August of 2014, but little did I expect the company to shoot up 67% in less than a year. I believe the gains can be tied back to management doing what it said it was going to do - deploying capital to add a third business, delivering better margins through restructuring, and upgrading the overall business (by exiting the creosote operations).

I do have some concerns that this somewhat illiquid and under-followed stock has now overshot the mark. A mid-$20's fair value seems reasonable even when factoring in additional M&A, but if KMG can identify acquisition targets with margins and FCF potential along the lines of Val-Tex, perhaps that target too could prove conservative.

Continue here for the full article:
KMG Chemicals Unlocking Its Potential

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