The highly cyclical materials industry has benefited producers in times of economic growth and seen many players out of business during a downturn. Hence an eye toward macroeconomic factors, such as demand for commodities, is necessary when investing in the materials sector. Westlake Chemical Partners and Olin are materials industry stocks on my list that are potentially undervalued, which means their current share prices are trading well-below what the companies are actually worth. Investors can profit from the difference by investing in these cyclical stocks as the current market prices should eventually move towards their true values. If capital gains are what you’re after in your next investment, I’ve put together a list of undervalued stocks you may be interested in, based on the latest financial data from each company.
Westlake Chemical Partners LP (NYSE:WLKP)
Westlake Chemical Partners LP operates, acquires, and develops ethylene production facilities and related assets in the United States. Westlake Chemical Partners is headed by CEO Albert Chao. With the stock’s market cap sitting at USD $752.74M, it comes under the small-cap group
WLKP’s shares are now floating at around -76% lower than its intrinsic value of $96.02, at the market price of US$23.35, based on my discounted cash flow model. The discrepancy signals an opportunity to buy low. In addition to this, WLKP’s PE ratio is trading at around 14.1x relative to its Chemicals peer level of, 18.22x suggesting that relative to its competitors, we can invest in WLKP at a lower price. WLKP is also in good financial health, with near-term assets able to cover upcoming and long-term liabilities. Finally, its debt relative to equity is 47.46%, which has been diminishing over time, signifying WLKP’s ability to pay down its debt. Dig deeper into Westlake Chemical Partners here.
Olin Corporation (NYSE:OLN)
Olin Corporation manufactures and distributes chemical products in the United States and internationally. Established in 1892, and currently lead by John Fischer, the company currently employs 6,400 people and has a market cap of USD $5.21B, putting it in the mid-cap category.
OLN’s stock is currently floating at around -25% less than its intrinsic level of $41.54, at a price tag of US$31.14, according to my discounted cash flow model. The mismatch signals a potential chance to invest in OLN at a discounted price. Moreover, OLN’s PE ratio stands at 9.42x while its Chemicals peer level trades at, 18.22x meaning that relative to other stocks in the industry, you can buy OLN for a cheaper price. OLN is also in great financial shape, as short-term assets amply cover upcoming and long-term liabilities. Dig deeper into Olin here.
Ternium S.A. (NYSE:TX)
Ternium S.A. manufactures and processes various steel products in Mexico, Argentina, Bolivia, Chile, Paraguay, Uruguay, Colombia, the United States, Central America, and internationally. Established in 1961, and now run by Maximo Vedoya, the company provides employment to 21,335 people and has a market cap of USD $6.40B, putting it in the mid-cap stocks category.
TX’s shares are currently hovering at around -32% lower than its value of $47.67, at a price tag of US$32.62, according to my discounted cash flow model. The difference between value and price signals a potential opportunity to buy TX shares at a discount. In terms of relative valuation, TX’s PE ratio stands at around 7.23x while its Metals and Mining peer level trades at, 12.08x meaning that relative to its peers, we can invest in TX at a lower price. TX is also strong in terms of its financial health, as short-term assets amply cover upcoming and long-term liabilities. More detail on Ternium here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks. Or create your own list by filtering companies based on fundamentals such as intrinsic discount, health score and future outlook using this free stock screener.