It has been a while since I've written on PolyOne (NYSE:POL), and I wasn't all that fond of the valuation on this specialty chemical company back in that last article in 2013.
Since then, the share's performance has been about half that of the
S&P 500, though somewhat less disappointing relative to other
chemical companies like Schulman (NASDAQ:SHLM), Clariant (OTCPK:CLZNY), and Westlake (NYSE:WLK).
Performance
has been hurt not only by execution issues in the acquired Spartech
business, but also a weakening macro environment, and this most recent
quarter was the first in over two years to show year-on-year revenue
down (though organic growth was still negative absent an adjustment for
energy-based pricing).
The investment prospects for
PolyOne are more interesting to me now. I like specialty chemical
companies, and I think PolyOne has a lot going for it with an array of
value-adding capabilities. I also like that management has been shoring
up some weaknesses and continuing to push the company in the direction
of "value over volume" and toward a model that could conceivably produce
double-digit ROICs on a more consistent basis.
Valuation
isn't a slam-dunk, but I've learned that it is worth paying attention
when quality specialty chemical companies look reasonably priced on a
discounted cash flow basis, as the market is often willing to pay
premiums to that value in healthier economic times.
Click here for more:
A Tough Macro Environment Is Masking Some Improvement At PolyOne
