Chemtrade (TSX:CHE.UN): Valuation in Focus After Full Redemption of 6.50% Convertible Debentures

When an income fund wraps up a major debt transaction, investors tend to pay close attention. That is exactly what is happening with Chemtrade Logistics Income Fund (TSX:CHE.UN), which has just completed the redemption of all its 6.50% convertible unsecured subordinated debentures due October 2026. The move, closing out nearly $100 million in outstanding principal, signals a decisive step in cleaning up the balance sheet and could reshape how the market views both risk and potential for the Fund moving forward.

This clean sweep comes after a period of steady upward momentum for Chemtrade Logistics Income Fund shares, which have climbed 35% over the past year and 17% in the past quarter. The redemption caps off a year marked by improving revenue and net income, with the Fund recording both higher annual growth rates and a three-year total return breaking past 100%. For investors, this financial reset is just the latest in a series of moves designed to bolster growth and operational flexibility over time.

With shares having gained ground and the company’s debt profile now looking a lot leaner, is Chemtrade Logistics Income Fund undervalued for what may come next, or is the market already factoring in all that potential upside?

Most Popular Narrative: 16% Undervalued

The most widely followed narrative suggests Chemtrade Logistics Income Fund is meaningfully undervalued, trading at a notable discount to fair value as projected by analysts using a 7.6% discount rate.

Chemtrade's expanding focus on water treatment solutions, reinforced by the Polytec and Thatcher acquisitions, positions the company to benefit from persistently rising demand from municipalities and food processing industries. This supports durable revenue growth and improved earnings stability as water scarcity and regulatory pressures intensify globally.

Ready to see the numbers behind Wall Street’s bullish outlook? This popular narrative banks on major growth catalysts and ambitious future profit targets, not just today’s performance. Want to know which assumptions could flip sentiment? Explore the full story and see what could drive the next re-rating.

Result: Fair Value of $15.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent input cost volatility and regulatory uncertainty could threaten Chemtrade’s growth story. These factors may challenge the optimism embedded in current analyst projections.

Find out about the key risks to this Chemtrade Logistics Income Fund narrative.

Another View: Our DCF Model Sides With the Bulls

Looking from a different angle, our SWS DCF model also suggests Chemtrade Logistics Income Fund is trading well below what its future cash flows may justify. However, does this forward-looking approach capture the full risk picture?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Chemtrade Logistics Income Fund for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Chemtrade Logistics Income Fund Narrative

If you want to dig deeper or chart your own path through the numbers, you can shape your own narrative in just a few minutes. Do it your way.

A great starting point for your Chemtrade Logistics Income Fund research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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