Huntsman stock undervalued, worth over $30

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Huntsman Corporation (HUN) is a global manufacturer and marketer of thousands of differentiated chemicals. The company founded in 1970 has grown into a $5 billion chemicals company employing over 16,000 employees in over 30 countries. Huntsman reported revenue of over $13 billion in 2014.  The company manufacturers products for a variety of industries such as chemicals, plastics, automotive, aviation, textiles, footwear, paints and coatings, construction, technology, agriculture, health care, detergent, personal care, furniture, appliances and packaging. Huntsman has over 100 manufacturing and R&D facilities around the world

The company operates in 5 business segments: Advanced Materials, Performance Products, Pigments & Additives, Polyurethanes and Textile Effects. The Performance products is the largest segment of the company with over 38% of its revenue generated from that segment. The textile effects is the smallest segment, generating 7% of the company’s revenue. According to their latest presentation, 31% of its revenues are generated in the United States and Canada, 30% in Europe, 23% in Asia Pacific and 16 % in the Rest of the World.

Source: Huntsman Investor Relations

Source: Huntsman Investor Relations

 

STRONG Recent Earnings

Huntsman recently reported strong First Quarter 2015 earnings and had a very good performance in their differentiated businesses. Adjusted EBITDA was $285 million and adjusted earnings per share was 40 cents. The strong dollar reduced adjusted EBITDA by $17 million. “I am pleased with the strong first quarter earnings demonstrated by our differentiated businesses which include MDI Urethanes, Performance Products, Advanced Materials and Textile Effects”, said Peter R. Huntsman CEO of Huntsman Corporation. He also said, “We continue to see strength in the markets we are serving and are encouraged by future growth prospects.

Growth from New Products

Huntsman has introduced several new products to the market which will help the company increase revenue. The company expects to generate approximately $2 billion in EBITDA by 2017. Here is a summary of their new products from a recent presentation:

Source: Huntsman Investor Relations

Source: Huntsman Investor Relations

 

WHY IS HUNTSMAN a GOOD LONG-TERM BUY

Huntsman stock (HUN) is currently trading at $22.40 and has a great divided yield of 2.2%. By manufacturing products for a diverse set of sustainable industries globally, it gives Huntsman a very wide economic moat and great pricing power. Its global footprint gives Huntsman good reach to its customers and enables the company to reap the rewards of the global economic expansion.

The stock currently has a forward P/E ratio of 7.9 well below its peers. Total Cash at the end of the last quarter was about $1 billion and total debt stood at $5.36 billion. The biggest portion of the company’s debt is not due till 2021. Additionally, Huntsman has a great return on equity of 15.24%.

Huntsman expects to earn over $2.5 per share in 2016. Given a P/E of 12, the stock could easily trade at $30 by the end of 2016. Thats a 34 percent return from current levels. If the market prices it at a P/E of 15, the stock could trade at $37.50, a whopping 67 percent return from current levels. Also, don’t forget the great dividend yield of over 2% which will likely increase with earnings growth. Patient investors will be rewarded.

Here is the latest presentation by the company: Huntsman’s Latest Presentation

For more details about the company visit their website: http://huntsman.com

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