Lanxess Getting More, But Not All, Of Its Due

Turnarounds take time, and one of the challenges companies in that position have is convincing the Street that it actually will be different this time. To that end, while shares of Germany’s Lanxess (OTCPK:LNXSF) (LXSG.DE) are up more than double from the early 2016 lows, the company has only been recently getting much credit for management’s efforts to transform the business from a highly cyclical, heavily commodity-oriented company to a more stable specialty-oriented chemical company.

With the shares recently breaking out above EUR 70 (or $80), there isn’t huge upside to these shares anymore, but I do believe the shares are about 10% undervalued as the company goes into its next leg of transformation and turnaround. Although 2018 volume growth may be lackluster, top-line disappointments could be a buying opportunity provided the underlying margin performance continues to head in the right direction.

The U.S. ADRs do not have very good liquidity, so I would caution investors to be careful about buying them (use limit orders), and I would suggest that those investors who can buy the local shares should do so.

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Lanxess Getting More, But Not All, Of Its Due