The chemical sector is well-positioned for long-term growth thanks to the high demand for specialty chemicals and the integration of digital technology. So, quality chemical stocks Brenntag SE (BNTGY), Shin-Etsu Chemical Co., Ltd. (SHECY), and Toray Industries, Inc. (TRYIY) could be worth buying. These stocks are currently trading under $20.
The global chemicals market is expected to be worth $7.06 trillion by 2027, with a CAGR of 7.3%. The growth can be attributed to rising demand in areas such as pharmaceuticals, agriculture, and manufacturing. Also, technological and innovative improvements are driving the creation of new chemical products and solutions, which is fuelling market expansion.
Green chemicals are becoming more popular, with end-user demand increasing significantly. Green chemicals are the outcome of increased concern about the environmental impact of traditional chemical manufacture and use. Moreover, the global green chemical industry is expected to be worth around $274.20 billion by 2032, growing at a CAGR of 10.8%.
Furthermore, the specialty chemicals industry is expected to increase at a 6.9% CAGR until 2027. The market is expected to grow by $357.76 billion, influenced by numerous factors, including rising demand for specialized chemicals from the agricultural industry, the need for recycled plastics, and demand for building chemicals.
In light of these encouraging trends, let’s look at the fundamentals of the three best Chemicals stocks, beginning with number 3.
Stock #3: Brenntag SE (BNTGY)
Headquartered in Essen, Germany, BNTGY purchases and supplies various industrial and specialty chemicals and ingredients in Germany and internationally. The company operates in two segments: Brenntag Essentials and Brenntag Specialties.
BNTGY’s forward EV/EBIT of 11.08x is 26.7% lower than the industry average of 15.12x. Its forward EV/Sales multiple of 0.79 is 52.7% lower than the industry average of 1.68.
BNTGY’s trailing-12-month asset turnover ratio of 1.69% is 108.6% higher than the 0.81% industry average. Its trailing-12-month ROTA of 7.16% is 41.7% higher than the 5.05% industry average.
BNTGY’s net revenues for the fiscal second quarter that ended June 30, 2023, came in at €4.26 billion ($4.55 billion). Its operating EBITA stood at €409.70 million ($437.86 million).
Moreover, profit attributable to BNTGY shareholders and earnings per share came in at €189.10 million ($202.10 million) and €1.23, respectively. For the same quarter, the company’s free cash flow increased 173.9% year-over-year to €431.70 million ($461.47 million).
The consensus revenue estimate of 19.93 billion for the year ending December 2024 represents a 5.8% increase year-over-year. BNTGY’s shares have gained 36.8% over the past nine months to close the last trading session at $16.25.
BNTGY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BNTGY has an A grade for Momentum and Stability. Within the Chemicals industry, it is ranked #22 out of 83 stocks. Click here for the additional POWR Ratings for Value, Growth, Sentiment, and Quality for BNTGY.
Stock #2: Shin-Etsu Chemical Co., Ltd. (SHECY)
Headquartered in Tokyo, Japan, SHECY, provides infrastructure, electronics, and functional materials in Japan. It is also involved in processing and specialized related services. The company operates in four segments: Infrastructure Materials; Electronics Materials; Functional Materials; and Processing and Specialized Services.
SHECY’s forward EV/EBIT multiple of 10.61 is 8.7% lower than the industry average of 11.63.
SHECY’s trailing-12-month net income margin of 24.63% is 278.6% higher than the 6.51% industry average. Its trailing-12-month EBIT margin of 34.17% is 202.5% higher than the 11.30% industry average.
SHECY’s total assets came in at ¥4.76 trillion ($32.22 billion) for the period that ended June 30, 2023, compared to ¥4.73 trillion ($32.03 billion) for the period that ended March 31, 2023. Its total current liabilities came in at ¥457 billion ($3.09 billion), compared to ¥507.81 billion ($3.44 billion) for the same period.
Analysts expect SHECY’s EPS to grow 180.1% year-over-year to $16.72 for the year ending March 2024. The stock has gained 41.8% over the past year to close the last trading session at $15.70.
It’s no surprise that SHECY has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Stability and a B for Quality. It is ranked #16 in the same industry.
Beyond what is stated above, we’ve also rated SHECY for Growth, Value, Sentiment, and Momentum. Get all SHECY ratings here.
Stock #1: Toray Industries, Inc. (TRYIY)
Headquartered in Tokyo, Japan, TRYIY together with its subsidiaries, manufactures, processes, and sells fibers and textiles, performance chemicals, carbon fiber composite materials, environment and engineering products, and life science products in Japan, China, North America, Europe, and internationally.
TRYIY’s forward EV/Sales of 0.84x is 44.4% lower than the industry average of 1.51x. Its forward Price/Sales multiple of 0.52 is 52.4% lower than the industry average of 1.09.
TRYIY’s trailing-12-month asset turnover ratio of 0.75% is 3.5% higher than the 0.72% industry average.
For the quarter that ended June 30, 2023, TRYIY’s revenues stood at ¥578.06 billion ($3.91 billion), while its operating income came in at ¥20.79 billion ($140.81 million). Its profit and EPS came in at ¥13.95 billion ($94.43 million) and ¥8.69, respectively.
Also, its total assets came in at ¥3.35 trillion ($22.67 billion) for the period that ended June 30, 2023, compared to ¥3.19 trillion ($21.63 billion) for the period that ended March 31, 2023.
Street expects TRYIY’s revenue to increase 281.4% year-over-year to $17.39 billion for the year ending March 2024. Over the past year the stock has gained 5.7% to close the last trading session at $11.24.
TRYIY’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.
It is ranked #15 in the same industry. It has an A grade for Stability and a B grade for Value. To see additional TRYIY’s ratings for Growth, Momentum, Sentiment and Quality, click here.
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SHECY shares were trading at $15.67 per share on Tuesday afternoon, down $0.04 (-0.23%). Year-to-date, SHECY has gained 28.39%, versus a 16.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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