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Stocks to Buy: 5 Reasons Value Investors Should Consider Dow Chemical Today
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Transcript of Stocks to Buy: 5 Reasons Value Investors Should Consider Dow Chemical Today
Stocks to Buy: 5 Reasons Value Investors Should Consider Dow
Chemical Today
Image source: Dow Chemical
Diversity: Helps reduce earnings volatility1
Diverse businesses
Performance plastics Performance materials
& chemicals Infrastructure solutions Consumer solutions Agricultural sciences
Dow operates five business segments:
Source: Company website
Diverse end markets Dow’s broad product portfolio serves several
key industries across 180 countries
Source: Company website
Innovative leadership: A compelling competitive advantage2
Full steam ahead
Dow demonstrated its innovative leadership last year, with
More than 5,000 new product launches 635 new U.S. patents – a record for the company
Solid foundation for the future
Dow’s patent-advantaged sales are growing rapidly – they now make up nearly a quarter of its total revenue
Source: Company website
Strong operational performance and financials3
Growing profitsDow’s net profit has more than doubled on flat revenue during the past five years
Rapidly rising EBITDA*
*EBITDA = Earnings before interest, tax, depreciation, and amortization. Figures on a trailing 12-month basis. Chart source: Dow Q2 2015 earnings presentation.
How is Dow pulling it off?
Through a threefold strategy Increased focus on high-margin value-added
productsTarget investments to exploit lower feedstock (crude
oil, natural gas) costsDivesting non-core operations to drive down costs
Strong financials
Key stats as of June 30, 2015Cash and cash equivalents: $6.2 billionLong-term debt: $17.8 billionInterest coverage ratio: 7.9Free cash flow (TTM*): $3.2 billion
*TTM = Trailing twelve months
Point to noteDow’s cash flows have grown while debt has
declined during the past five years
Big-ticket growth plans = solid foundation for the future4
Investing for growth Major growth projects underway: Potential to
add more than $3 billion in annual EBITDA
Source: Dow Chemical 2014 Annual Report
Investing for growth
Key projects includeSadara: Dow-Saudi Aramco joint venture to build the world’s largest petrochemical facilityNew ethylene, propylene production plants in Texas
Impressive shareholder returns5
Value for shareholdersDow demonstrated its commitment to shareholders in 2014, when it
Increased its dividend twiceExpanded its share repurchase program to $9.5 billion from $4.5 billion
Growing dividends
Dow’s dividend has grown at a compounded rate of 19% since 2009
Source: Dow Chemical 2014 Annual Report
Higher buybacksShare buybacks have ramped up, too
Source: Dow Chemical 2014 Annual Report
To sum up
Dow Chemical measures up on key counts: operational performance, financials, growth catalysts, and shareholder returns. So any dip in its
share price could present an opportunity for value investors.
This Could Be The Next Billion-Dollar iSecret