Innospec (NasdaqGS:IOSP) - Share price, News & Analysis

Q: What is the Fair Price of IOSP when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

IOSP ($98.37) is trading above our estimate of [[fair value]] ($67.14)

IOSP fundamental analysis
Snowflake Score
Valuation	2/6
Future Growth	3/6
Past Performance	5/6
Financial Health	6/6
Dividends	1/6

IOSP Stock Overview

Innospec Inc. develops, manufactures, blends, markets, and supplies specialty chemicals in the United States, rest of North America, the United Kingdom, rest of Europe, and internationally.

Rewards

Earnings are forecast to grow 21.44% per year

Earnings grew by 43.2% over the past year

Risk Analysis

No risks detected for IOSP from our risk checks.

Innospec Competitors

GCP Applied Technologies

NYSE:GCP

US$2.3b

Minerals Technologies

NYSE:MTX

US$2.1b

Ingevity

NYSE:NGVT

US$2.8b

Stepan

NYSE:SCL

US$2.5b

Price History & Performance

Summary of all time highs, changes and price drops for Innospec
Historical stock prices
Current Share Price	US$99.45
52 Week High	US$106.87
52 Week Low	US$81.00
Beta	1.13
1 Month Change	9.83%
3 Month Change	-2.01%
1 Year Change	5.71%
3 Year Change	17.00%
5 Year Change	79.84%
Change since IPO	493.73%

Recent News & Updates

Jul 21

Innospec: A Buy Before The Upcoming Earnings Release

There is a positive correlation between the crude oil futures price and the revenue generated by two of the three business segments at Innospec. The analysis indicates that Q2 2022 and Q3 2022 earnings will beat analysts’ EPS estimates. Innospec has a track record of beating analysts’ targets, and the market will typically buy the stock in the run-up to the earnings call. I rate IOSP a buy, with a near-term price target of $102.00 (5.5%), climbing to $107.50 by mid-November (11%). Innospec (IOSP) is a leading international specialty chemical company divided into three business units: Fuel Specialties, Performance Chemicals, and Oilfield Services. There is a positive correlation between the crude oil futures price and the revenue generated by two of the three business segments at Innospec (Fuel Specialties and Oilfield Services). However, the rise in price for crude oil futures throughout the first half of 2022 has not necessarily been considered by market analysts when formulating their EPS estimates. Not only am I expecting earnings to beat analysts' estimates, but I'm also anticipating the share price to rise in the run-up to the earnings call. I rate IOSP a buy, with a near-term price target of $102.00 (5.5%), climbing to $107.50 by mid-November (11%). Analysis Revenue for Fuel Specialties and Oilfield Services has historically been strongly correlated to the price of crude oil futures. In fact, with specific reference to the Oilfield Services business unit, Innospec stated the following in their 10-K: Trends in oil and gas prices affect the level of exploration, development and production activity of our customers, and the demand for our services and products. And in their Q4 2021 earnings press release, Innospec highlighted a delay in demand recovery for jet fuel - which is primarily derived from crude oil - as the main cause for gross margins in the Fuel Specialties business running below their target levels. Therefore, by using linear regression to model the relationship between revenue earned and historical crude oil futures prices, we can forecast revenue for the next two quarters. Revenue Estimates The analysis below considers the revenue earned by the two business units for the past 12 quarters, and the historical crude oil futures price for the final day of the prior quarter. For the purposes of the analysis, a one quarter lag to the crude oil futures price has been applied, allowing for any customer decisions based on the Futures price to materialize as revenue for Innospec. That is, the crude oil futures price at the close on March 31, 2019, is being compared against the Q2 2019 revenue. Fuel Specialties: Relationship between Crude Oil Futures prices and Fuel Specialties revenue (Image created by author using data from Investing.com and Innospec's SEC filings) Oilfield Services: Relationship between Crude Oil Futures prices and Oilfield Services revenue (Image created by author using data from Investing.com and Innospec's SEC filings) As can be seen in the graphs above, the revenue earned in both business units follows the crude oil futures price trend. The analysis suggests increased revenue in Q2 and Q3 for both Fuel Specialties and Oilfield Services versus Q1 2022 and the equivalent quarter in 2021: Revenue for Fuel Specialties and Oilfield Services business units (Image created by author using data from Innospec's SEC filings and author's calculations) Implications on Earnings By using the revenue estimates calculated from the regression analysis for Fuel Specialties and Oilfield Services and by applying the assumptions outlined in the bullet points below, I have forecast net income for Q2 and Q3 2022. Revenue estimates for the Performance Chemicals business unit have been calculated using the same YoY revenue growth rate as Q1 2022 (32.7%). Operating income has been calculated by multiplying the Q1 2022 operating margins for each business unit with the revenue estimates. Corporate costs and interest expenses have been run rated from Q1 2022. A prudent assumption on Other Income has been applied and a 24.3% effective tax rate (the Q1 2022 rate) has been used to calculate income tax. Forecast of Innospec's Earnings (Image created by author using data from Innospec's SEC filings and author's calculations) Opportunity When adjusting the net income for non-GAAP amounts and assuming the diluted average shares are reduced by 30k per quarter from the Q1 2022 average (on Feb. 15, 2022, the company announced a repurchase plan for up to $50m of common stock over a three-year period; March 2022 saw 10k shares repurchased), the EPS is: Anticipated Earnings per Share (Image created by author using data from Innospec's Yahoo Finance and author's calculations) Per the table, both Q2 2022 and Q3 2022 earnings will beat analysts' estimates. Innospec has a track record of beating analysts' estimates, as you can see from the table below: Earnings History (Yahoo Finance) In fact, such is the track record of Innospec to outperform estimates, the market will typically buy the stock in the run-up to the earnings call with little movement to the price in the days that follow. Below, I have included charts showing the share price movement in the five days before and after the earnings release for each of the last four quarters. Q2 2021: Share price movement in the days around the Q2'21 earnings release (Image created by author using data from Yahoo Finance) Gains from July 27, 2021, to Aug. 3, 2021 (earnings release) = 1.2% Gains from July 27, 2021, to Aug. 10, 2021 = 7.8% Q3 2021: Share price movement in the days around the Q3'21 earnings release (Image created by author using data from Yahoo Finance) Gains from Oct. 27, 2021, to Nov. 3, 2021 (earnings release) = 7.0% Gains from Oct. 27, 2021, to Nov. 10, 2021 = 7.1% Q4 2021: Share price movement in the days around the Q4'21 earnings release (Image created by author using data from Yahoo Finance) Gains from Feb. 9, 2022, to Feb. 16, 2022 (earnings release) = 7.2% Gains from Feb. 9, 2022, to Feb. 24, 2022 = 4.3%

Jul 20

Should You Think About Buying Innospec Inc. (NASDAQ:IOSP) Now?

Innospec Inc. ( NASDAQ:IOSP ), is not the largest company out there, but it saw a double-digit share price rise of over...

Jul 02

Innospec (NASDAQ:IOSP) Has Some Way To Go To Become A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically...

Shareholder Returns

	IOSP	US Chemicals	US Market
7D	4.4%	3.8%	1.3%
1Y	5.7%	-5.8%	-11.7%

Return vs Industry: IOSP exceeded the US Chemicals industry which returned -6.4% over the past year.

Return vs Market: IOSP exceeded the US Market which returned -11.6% over the past year.

Price Volatility

Is IOSP's price volatile compared to industry and market?
IOSP volatility
IOSP Average Weekly Movement	3.8%
Chemicals Industry Average Movement	6.9%
Market Average Movement	7.8%
10% most volatile stocks in US Market	16.9%
10% least volatile stocks in US Market	3.2%

Stable Share Price: IOSP is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: IOSP's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1938	1,900	Patrick Williams	https://innospec.com

Innospec Inc. develops, manufactures, blends, markets, and supplies specialty chemicals in the United States, rest of North America, the United Kingdom, rest of Europe, and internationally. The company’s Fuel Specialties segment offers a range of specialty chemical products that are used as additives in various fuels. This segment’s products are used in the operation of automotive, marine, and aviation engines; power station generators; and heating oil.

Innospec Fundamentals Summary

How do Innospec's earnings and revenue compare to its market cap?
IOSP fundamental statistics
Market Cap	US$2.44b
Earnings (TTM)	US$116.10m
Revenue (TTM)	US$1.73b

21.2x

P/E Ratio

1.4x

P/S Ratio

Is IOSP overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
IOSP income statement (TTM)
Revenue	US$1.73b
Cost of Revenue	US$1.22b
Gross Profit	US$504.90m
Other Expenses	US$388.80m
Earnings	US$116.10m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	4.68
Gross Margin	29.20%
Net Profit Margin	6.71%
Debt/Equity Ratio	0%

How did IOSP perform over the long term?

See historical performance and comparison

Dividends

1.3%

Current Dividend Yield

26%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is IOSP undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

2/6

Valuation Score 2/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for IOSP?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for IOSP. This is calculated by dividing IOSP's market cap by their current preferred multiple.
What is IOSP's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$2.44b

IOSP key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.4x
Enterprise Value/EBITDA	11.9x
PEG Ratio	1x

Price to Earnings Ratio vs Peers

How does IOSP's PE Ratio compare to its peers?

IOSP PE Ratio vs Peers

The above table shows the PE ratio for IOSP vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	56.5x
GCP GCP Applied Technologies	177.7x	n/a	US$2.3b
MTX Minerals Technologies	12.1x	11.5%	US$2.1b
NGVT Ingevity	19.1x	16.8%	US$2.8b
SCL Stepan	16.3x	6.5%	US$2.5b
IOSP Innospec	21x	21.4%	US$2.4b

Price-To-Earnings vs Peers: IOSP is good value based on its Price-To-Earnings Ratio (21x) compared to the peer average (56.3x).

Price to Earnings Ratio vs Industry

How does IOSP's PE Ratio compare vs other companies in the US Chemicals Industry?

Price-To-Earnings vs Industry: IOSP is expensive based on its Price-To-Earnings Ratio (21x) compared to the US Chemicals industry average (16.3x)

Price to Earnings Ratio vs Fair Ratio

What is IOSP's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

IOSP PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	21.2x
Fair PE Ratio	21.3x

Price-To-Earnings vs Fair Ratio: IOSP is good value based on its Price-To-Earnings Ratio (21x) compared to the estimated Fair Price-To-Earnings Ratio (21.3x).

Share Price vs Fair Value

What is the Fair Price of IOSP when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: IOSP ($98.37) is trading above our estimate of fair value ($67.14)

Significantly Below Fair Value: IOSP is trading above our estimate of fair value.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.

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Future Growth

How is Innospec forecast to perform in the next 1 to 3 years based on estimates from 3 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

21.4%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: IOSP's forecast earnings growth (21.4% per year) is above the savings rate (1.9%).

Earnings vs Market: IOSP's earnings (21.4% per year) are forecast to grow faster than the US market (14.5% per year).

High Growth Earnings: IOSP's earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: IOSP's revenue (7.4% per year) is forecast to grow slower than the US market (8% per year).

High Growth Revenue: IOSP's revenue (7.4% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: Insufficient data to determine if IOSP's Return on Equity is forecast to be high in 3 years time

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Past Performance

How has Innospec performed over the past 5 years?

Past Performance Score

5/6

Past Performance Score 5/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

2.9%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: IOSP has high quality earnings.

Growing Profit Margin: IOSP's current net profit margins (6.7%) are higher than last year (6.4%).

Past Earnings Growth Analysis

Earnings Trend: IOSP's earnings have grown by 2.9% per year over the past 5 years.

Accelerating Growth: IOSP's earnings growth over the past year (43.2%) exceeds its 5-year average (2.9% per year).

Earnings vs Industry: IOSP earnings growth over the past year (43.2%) exceeded the Chemicals industry 19.9%.

Return on Equity

High ROE: IOSP's Return on Equity (10.9%) is considered low.

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Financial Health

How is Innospec's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: IOSP's short term assets ($799.3M) exceed its short term liabilities ($369.2M).

Long Term Liabilities: IOSP's short term assets ($799.3M) exceed its long term liabilities ($200.1M).

Debt to Equity History and Analysis

Debt Level: IOSP is debt free.

Reducing Debt: IOSP has no debt compared to 5 years ago when its debt to equity ratio was 35.3%.

Debt Coverage: IOSP has no debt, therefore it does not need to be covered by operating cash flow.

Interest Coverage: IOSP has no debt, therefore coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is Innospec current dividend yield, its reliability and sustainability?

Dividend Score

1/6

Dividend Score 1/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

1.27%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: IOSP's dividend (1.28%) isn’t notable compared to the bottom 25% of dividend payers in the US market (1.5%).

High Dividend: IOSP's dividend (1.28%) is low compared to the top 25% of dividend payers in the US market (4.05%).

Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, IOSP has been paying a dividend for less than 10 years.

Growing Dividend: IOSP's dividend payments have increased, but the company has only paid a dividend for 9 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonably low payout ratio (26%), IOSP's dividend payments are well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: IOSP is paying a dividend but the company has no free cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

6.2yrs

Average management tenure

CEO

Patrick Williams (57 yo)

13.33yrs

Tenure

US$9,897,900

Compensation

Mr. Patrick S. Williams serves as an Independent Director at AdvanSix Inc. since February 25, 2020. He has been the Chief Executive Officer and President at Innospec Inc. since April 2, 2009. He has been a...

CEO Compensation Analysis

Compensation vs Market: Patrick's total compensation ($USD9.90M) is above average for companies of similar size in the US market ($USD6.58M).

Compensation vs Earnings: Patrick's compensation has increased by more than 20% in the past year.

Leadership Team

Experienced Management: IOSP's management team is seasoned and experienced (6.2 years average tenure).

Board Members

Experienced Board: IOSP's board of directors are considered experienced (8.1 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/12 00:00
End of Day Share Price	2022/08/12 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31