Despite facing headwinds of supply chain disruptions and geopolitical issues, the chemical sector has steadily recovered over the past year. Therefore, investors could look to buy fundamentally strong chemical stocks NewMarket Corporation (NEU), CSW Industrials, Inc. (CSWI), and ChromaDex Corporation (CDXC).
Speeding up innovation in the chemical industry arguably boosts advancements in numerous other sectors. For example, the sector plays a role in 96% of all manufactured goods, from lithium-ion batteries powering EVs to life-saving vaccines during a global pandemic. Moreover, the industry plays a crucial role in tackling climate change, driving the urgency for change and optimization.
Although the current market volatility could keep other industries under pressure, the chemical industry remains a significant contributor to the global economy and is anticipated to continue evolving as innovations emerge. The global chemicals market is expected to grow to $6.37 trillion in 2026 at a CAGR of 8.4%.
Given these factors, investors could be wise to buy the featured stocks. Let’s take a closer look at their fundamentals.
NewMarket Corporation (NEU)
NEU primarily engages in the manufacture and sale of petroleum additives. The company offers lubricant additives for use in various vehicle and industrial applications, engine oil additives, and industrial additives designed for products for industrial applications and industrial specialty applications.
In terms of the trailing-12-month EBIT margin, NEU’s 15.43% is 33.8% higher than the 11.53% industry average. Likewise, its 40.05% trailing-12-month Return on Common Equity is 275% higher than the industry average of 10.68%. Furthermore, the stock’s 13.52% trailing-12-month Return on Total Assets is 181.6% higher than the industry average of 4.80%.
NEU’s total revenue for the fiscal first quarter ended March 31, 2023, increased 6.1% year-over-year to $702.79 million. The company’s net income increased 64.5% year-over-year to $97.58 million. In addition, its EPS came in at $10.09, representing a 75.5% increase over the prior-year quarter.
Over the past nine months, the stock has gained 33.6% to close the last trading session at $402.27.
NEU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #4 out of 84 stocks in the Chemicals industry. In addition, it has a B grade for Growth, Value, Stability, and Quality.
Click here to see the additional ratings of NEU for Momentum, and Sentiment.
CSW Industrials, Inc. (CSWI)
CSWI operates as a diversified industrial company worldwide. It operates through three segments: Contractor Solutions; Engineered Building Solutions; and Specialized Reliability Solutions.
In terms of the trailing-12-month EBIT margin, CSWI’s 18.34% is 89.2% higher than the 9.69% industry average. Its 11.04% trailing-12-month levered FCF margin is 111.8% higher than the 5.21% industry average. Likewise, its 12.72% trailing-12-month net income margin is 99.6% higher than the industry average of 6.38%.
CSWI’s net revenues for the fourth quarter that ended March 31, 2023, increased 12.9% year-year-over-year to $195.69 million. Its operating income increased 37.4% year-over-year to $39.77 million. Additionally, it’s adjusted net income attributable to CSWI increased 46.7% year-over-year to $27.06 million, while its adjusted net EPS came in at $1.74, representing a 48.7% increase over the prior-year quarter.
CSWI’s EPS and revenue for the quarter ending June 30, 2023, are expected to increase 2.4% and 6.8% year-over-year to $1.93 and $213.50 million, respectively. It has a creditable earnings surprise history, surpassing its consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 43.4% to close the last trading session at $157.34.
CSWI’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. It is ranked #9 in the same industry. It has an A grade for Sentiment and a B for Momentum and Quality.
In total, we rate CSWI on eight different levels. Beyond what we stated above, we have also given CSWI grades for Growth, Value, and Stability. Click here to access all the ratings.
ChromaDex Corporation (CDXC)
CDXC operates as a bioscience company focusing on developing healthy aging products. The company operates through three segments: Consumer products; Ingredients; and Analytical Reference Standards and Services.
In terms of the trailing-12-month gross profit margin, CDXC’s 59.19% is 6.1% higher than the 55.77% industry average. Likewise, its 1.45x trailing-12-month asset turnover ratio is 312.4% higher than the industry average of 0.35x.
For the fiscal first quarter that ended March 31, 2023, CDXC’s total sales increased 30.7% year-over-year to $22.56 million. The company’s gross profit increased 28.4% year-over-year to $13.52 million.
Analysts expect CDXC’s revenue for the quarter ended June 30, 2023, to increase 16.7% year-over-year to $19.52 million. It has an impressive earnings surprise history, surpassing its consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 15.4% to close the last trading session at $1.57.
CDXC’s strong outlook reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #2 in the Chemicals industry. It has an A grade for Growth and a B for Value, Sentiment, and Quality.
We have also given CDXC grades for Momentum and Stability. Get all CDXC ratings here.
What To Do Next?
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NEU shares were trading at $400.30 per share on Friday morning, down $1.97 (-0.49%). Year-to-date, NEU has gained 29.47%, versus a 13.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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