Dow (NYSE:DOW) - Share price, News & Analysis

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

DOW ($56.02) is trading below our estimate of [[fair value]] ($104.79)

DOW fundamental analysis
Snowflake Score
Valuation	5/6
Future Growth	1/6
Past Performance	6/6
Financial Health	3/6
Dividends	4/6

DOW Stock Overview

Rewards

Trading at 46.5% below our estimate of its fair value

Earnings grew by 62% over the past year

Risk Analysis

Earnings are forecast to decline by an average of 10.7% per year for the next 3 years

Has a high level of debt

Unstable dividend track record

Dow Competitors

LyondellBasell Industries

NYSE:LYB

US$29.7b

Westlake

NYSE:WLK

US$13.9b

Olin

NYSE:OLN

US$8.4b

Valvoline

NYSE:VVV

US$5.5b

Price History & Performance

Summary of all time highs, changes and price drops for Dow
Historical stock prices
Current Share Price	US$56.02
52 Week High	US$71.86
52 Week Low	US$48.27
Beta	1.34
1 Month Change	6.81%
3 Month Change	-17.75%
1 Year Change	-7.48%
3 Year Change	33.22%
5 Year Change	n/a
Change since IPO	-0.41%

Recent News & Updates

Aug 02

Are Investors Undervaluing Dow Inc. (NYSE:DOW) By 49%?

Today we will run through one way of estimating the intrinsic value of Dow Inc. ( NYSE:DOW ) by taking the expected...

Jul 25

Dow: Bag This Chemical Giant's 5.4% Yield

Dow is a diversified chemical company with a global footprint and solid profitability. Management is being disciplined with its cash flow by paying down debt and returning cash to shareholders via share buybacks and dividends. Its beaten down share price makes it a cyclical stock worth buying at present. Cyclical companies are often favorites among value investors because they can offer solid capital appreciation potential, so long as one buys closer to the bottom of the cycle than the top. It's even better if these companies pay a stable dividend to investors while they wait for an eventual turnaround. This brings me to Dow Inc. (DOW), which appears to be much closer to a bottom than its top of $70 share price achieved as recently as May. In this article, I highlight what makes Dow a good buy on share price weakness for potentially strong gains, so let's get started. Why Dow? Dow Inc. is among the three largest chemicals producers in the world, making plastics, chemicals and agricultural products across a broad set of use cases in consumer care, industrial, infrastructure, and farming. The company was formed in 2019 when its former parent, DowDuPont split into three publicly traded companies. It operates in 160 countries, has 54K employees, and generated $60 billion in total revenue over the trailing 12 months. Dow recently released respectable results, with revenue growing by 13% YoY (up 3% sequentially) to $15.7 billion in the second quarter. This was driven by gains in all regions except for Asia Pacific, which was impacted by pandemic-related lockdowns in China. Notably, global volume declined by a slight 2%, but Dow was able to offset this with a 16% price increase, signaling pricing power. As shown below, Dow scores an A profitability rating with a sector-leading FCF margin of 7.5% and a 38% return on equity. Dow Profitability (Seeking Alpha) Also encouraging, management is being disciplined with its cash flow, as it redeemed $750 million of outstanding notes, which will lower its annual interest expense by $27 million. It also has no substantial long-term debt maturities until 2027. It's also aggressively returning cash to shareholders. This is reflected by the $1.3 billion in capital returns during the second quarter alone, comprised of an impressive $800 million share buybacks and $505 million in dividends. While the quarterly dividend rate of $0.70 has remained flat, I give the company a pass, as it only recently initiated it in 2019, just before the global pandemic. Besides, the dividend is well covered by a low 29% payout ratio, giving ample room for raises down the line, especially after the reduced share count after repurchases. Headwinds to Dow include its sensitivity to raw material costs, which could pressure margins. Moreover, the CEO recently warned of a slowdown in Europe should natural gas be curtained because of reduced Russian supplies. Gas rationing, in general, could hurt metal production and processing as well as the chemical and paper industries. Nonetheless, Dow's low-cost position makes it well positioned to face near-term headwinds. In addition, it's seeing encouraging signs of normalization in industrial output from China, as noted in the recent conference call: In Europe, the geopolitical and inflationary environment is driving moderation in consumer confidence and spending. However, PMI was still at expansionary levels at the end of the quarter. In China, economic activity began to recover at the end of the quarter, with manufacturing PMI expanding in June and Chinese output and new orders lifting to expansionary levels for the first time since February. And as the regional economy continues to reopen, we expect industrial output and consumer spending to benefit from easing supply chain constraints as well. While the macroeconomic environment remains dynamic, we continue to see areas of underlying strength across our market verticals where demand and consumer spending have been resilient. Our unique competitive advantages including our global footprint, our industry-leading feedstock and derivative flexibility, combined with our chemistry toolkit and our innovation engine enabled Dow to remain agile to changing geographic energy and market conditions. Importantly, oil-gas spreads continue to support our structurally advantaged feedstock positions along the U.S. Gulf Coast, Canada, Argentina, and the Middle East. These advantages enable us to mitigate the impacts of higher raw material and energy costs as we navigate the market dynamics around the world.

Jul 22

Is Dow (NYSE:DOW) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to...

Shareholder Returns

	DOW	US Chemicals	US Market
7D	1.4%	1.5%	1.4%
1Y	-7.5%	-0.9%	-8.4%

Return vs Industry: DOW underperformed the US Chemicals industry which returned -1.9% over the past year.

Return vs Market: DOW exceeded the US Market which returned -9% over the past year.

Price Volatility

Is DOW's price volatile compared to industry and market?
DOW volatility
DOW Average Weekly Movement	4.3%
Chemicals Industry Average Movement	6.6%
Market Average Movement	7.6%
10% most volatile stocks in US Market	17.1%
10% least volatile stocks in US Market	3.1%

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

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

About the Company

Founded	Employees	CEO	Website
2018	35,700	Jim Fitterling	https://www.dow.com

Dow Inc. provides various materials science solutions for packaging, infrastructure, mobility, and consumer applications in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. It operates through Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings segments. The Packaging & Specialty Plastics segment provides ethylene, and propylene and aromatics products; and polyethylene, polyolefin elastomers, ethylene vinyl acetate, and ethylene propylene diene monomer rubbers.

Dow Fundamentals Summary

How do Dow's earnings and revenue compare to its market cap?
DOW fundamental statistics
Market Cap	US$40.23b
Earnings (TTM)	US$6.62b
Revenue (TTM)	US$60.13b

6.1x

P/E Ratio

0.7x

P/S Ratio

Is DOW overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
DOW income statement (TTM)
Revenue	US$60.13b
Cost of Revenue	US$48.73b
Gross Profit	US$11.40b
Other Expenses	US$4.79b
Earnings	US$6.62b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 20, 2022

Earnings per share (EPS)	9.21
Gross Margin	18.96%
Net Profit Margin	11.00%
Debt/Equity Ratio	66.1%

How did DOW perform over the long term?

See historical performance and comparison

Dividends

5.0%

Current Dividend Yield

31%

Payout Ratio

Does DOW pay a reliable dividends?

See DOW dividend history and benchmarks

When do you need to buy DOW by to receive an upcoming dividend?
Dow dividend dates
Ex Dividend Date	Aug 30 2022
Dividend Pay Date	Sep 09 2022
Days until Ex dividend	10 days
Days until Dividend pay date	20 days

Does DOW pay a reliable dividends?

See DOW dividend history and benchmarks

We’ve recently updated our valuation analysis.

Valuation

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

Valuation Score

5/6

Valuation Score 5/6

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 DOW?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for DOW. This is calculated by dividing DOW's market cap by their current preferred multiple.
What is DOW's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$40.23b

DOW 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	0.9x
Enterprise Value/EBITDA	4.6x
PEG Ratio	-0.6x

Price to Earnings Ratio vs Peers

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

DOW PE Ratio vs Peers

The above table shows the PE ratio for DOW vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	7.1x
LYB LyondellBasell Industries	5.5x	-8.6%	US$29.7b
WLK Westlake	4.9x	-23.6%	US$13.9b
OLN Olin	5.6x	-9.8%	US$8.4b
VVV Valvoline	12.6x	-37.9%	US$5.5b
DOW Dow	6.1x	-10.7%	US$40.2b

Price-To-Earnings vs Peers: DOW is good value based on its Price-To-Earnings Ratio (6.1x) compared to the peer average (7.1x).

Price to Earnings Ratio vs Industry

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

Price-To-Earnings vs Industry: DOW is good value based on its Price-To-Earnings Ratio (6.1x) compared to the US Chemicals industry average (17x)

Price to Earnings Ratio vs Fair Ratio

What is DOW'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.

DOW PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	6.1x
Fair PE Ratio	13.3x

Price-To-Earnings vs Fair Ratio: DOW is good value based on its Price-To-Earnings Ratio (6.1x) compared to the estimated Fair Price-To-Earnings Ratio (13.3x).

Share Price vs Fair Value

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

Below Fair Value: DOW ($56.02) is trading below our estimate of fair value ($104.79)

Significantly Below Fair Value: DOW is trading below fair value by more than 20%.

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 Dow forecast to perform in the next 1 to 3 years based on estimates from 17 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

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

-10.7%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: DOW's earnings are forecast to decline over the next 3 years (-10.7% per year).

Earnings vs Market: DOW's earnings are forecast to decline over the next 3 years (-10.7% per year).

High Growth Earnings: DOW's earnings are forecast to decline over the next 3 years.

Revenue vs Market: DOW's revenue is expected to decline over the next 3 years (-2.6% per year).

High Growth Revenue: DOW's revenue is forecast to decline over the next 3 years (-2.6% per year).

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: DOW's Return on Equity is forecast to be high in 3 years time (23.3%)

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Past Performance

How has Dow performed over the past 5 years?

Past Performance Score

6/6

Past Performance Score 6/6

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

54.3%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: DOW has high quality earnings.

Growing Profit Margin: DOW's current net profit margins (11%) are higher than last year (8.8%).

Past Earnings Growth Analysis

Earnings Trend: DOW has become profitable over the past 5 years, growing earnings by 54.3% per year.

Accelerating Growth: DOW's earnings growth over the past year (62%) exceeds its 5-year average (54.3% per year).

Earnings vs Industry: DOW earnings growth over the past year (62%) exceeded the Chemicals industry 20.9%.

Return on Equity

High ROE: DOW's Return on Equity (34.3%) is considered high.

Discover strong past performing companies

Financial Health

How is Dow's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

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

Financial Position Analysis

Short Term Liabilities: DOW's short term assets ($21.8B) exceed its short term liabilities ($13.3B).

Long Term Liabilities: DOW's short term assets ($21.8B) do not cover its long term liabilities ($29.3B).

Debt to Equity History and Analysis

Debt Level: DOW's net debt to equity ratio (52.2%) is considered high.

Reducing Debt: Insufficient data to determine if DOW's debt to equity ratio has reduced over the past 5 years.

Debt Coverage: DOW's debt is well covered by operating cash flow (67.9%).

Interest Coverage: DOW's interest payments on its debt are well covered by EBIT (15x coverage).

Balance Sheet

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Dividend

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

Dividend Score

4/6

Dividend Score 4/6

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

5.00%

Current Dividend Yield

Upcoming Dividend Payment

Dividend Yield vs Market

Notable Dividend: DOW's dividend (5%) is higher than the bottom 25% of dividend payers in the US market (1.48%).

High Dividend: DOW's dividend (5%) is in the top 25% of dividend payers in the US market (3.99%)

Stability and Growth of Payments

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

Growing Dividend: DOW has only been paying a dividend for 3 years, and since then payments have not increased.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonably low payout ratio (31.1%), DOW's dividend payments are well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonably low cash payout ratio (32.2%), DOW's dividend payments are well covered by cash flows.

Discover strong dividend paying companies

Management

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

3.7yrs

Average management tenure

CEO

Jim Fitterling (60 yo)

4yrs

Tenure

US$24,858,892

Compensation

Mr. James R. Fitterling, also known as Jim, serves as an Independent Director at 3M Company since February 5, 2021. He has been Chief Executive Officer of The Dow Chemical Company since July 1, 2018 and ha...

CEO Compensation Analysis

Compensation vs Market: Jim's total compensation ($USD24.86M) is above average for companies of similar size in the US market ($USD12.88M).

Compensation vs Earnings: Jim's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: DOW's management team is considered experienced (3.7 years average tenure).

Board Members

Experienced Board: DOW's board of directors are considered experienced (3.5 years average tenure).

Ownership

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

Insider Trading Volume

Insider Buying: DOW 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	2022/08/18 00:00
End of Day Share Price	2022/08/18 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31