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Value

Specialty chemicals are hot. Innophos Holdings Inc. (IPHS - Snapshot Report) continued with its streak of double digit sales growth as sales jumped 17% in Q1 after climbing 31% in the fourth quarter. This Zacks #1 Rank (strong buy) has the magic combination of strong earnings growth and low valuation, as it sports a PEG of just 0.8.

Innophos Holdings manufactures specialty phosphates. Operating as a holding company, it offers products to customers for use in food and beverages, pharmaceuticals and other industrial applications.

Odds are, you've used the company's product if you brush your teeth with toothpaste or drink just about any beverage.

The company operates 7 manufacturing facilities in the U.S., Canada and Mexico.

Innophos Beat By 8% in Q1

On May 2, Innophos reported its first quarter results and surprised on the Zacks Consensus by 8 cents per share. Earnings per share were $1.08 compared to the Zacks Consensus of $1.00. This was more than double the 47 cents it made in the first quarter of 2010.

Sales surged to $198 million, up 17% from last year as prices rose 9% and volume grew 8%. The quarter was boosted by the Specialty Phosphate and GTSP & Other divisions.

Specialty Phosphate sales grew 12%, as prices and volumes both surged 6%. Mexico sales were especially strong, increasing 28% and prices were up 9% due to higher grad PPA and food grade specialty phosphate sales.

In the US/Canada, sales were up 6% primarily on price increases. In keeping with its improvement in product mix, the company is about to launch a low sodium baking powder at major retailers.

GTSP & Other sales (primarily fertilizer co-products) rose 75% to $22 million on strong pricing and volume.

Outlook Is Still Bullish

Volume growth for the year for the Specialty Phosphates is expected to remain similar to the first quarter, which was 12%.

It also expects current profitability for GTSP & Other division to be above its historical average due to the strong fertilizer market.

Zacks Consensus Estimates Rise

2 estimates have moved up since the earnings announcement for the full year.

The 2011 Zacks Consensus jumped to $3.94 from $3.88 per share which is earnings growth of 36% compared to 2010.

The 2012 Zacks Consensus also rose by 3 cents to $4.16 per share. Analysts are more subdued about the 2012 outlook as that is earnings growth of just 5.5%.

Still a Value Stock

When I last reviewed Innophos in Feb 2011, it was trading with a forward P/E of 10.9. Not much has changed. Shares are still cheap as it currently has a P/E of 11.3.

It has a price-to-book ratio of 2.7 which is under the 3.0 cut-off I use for a value stock.

The company has other outstanding fundamentals, including a 1-year return on equity (ROE) of 20.4%.

It also recently raised its dividend by 47% to 24 cents per share from 17 cents per share. It was payable to shareholders on Apr 29. The dividend currently yields 2.2%.

Shares at 3-Year High

All the good news has pushed the share price up to new 3-year highs. But, valuations are still reasonable.

This Week's Value Zacks Rank Buy Stocks

Forget tech stocks, the health insurers are hot. UnitedHealth Group (UNH) recently raised full year guidance after first quarter results beat the Zacks Consensus by a whopping 37%. This Zacks #1 Rank (strong buy) is also a value stock with a forward P/E of only 11.6. Read the full article.

Manufacturing is back! Illinois Tool Works Inc. (ITW) recently saw revenue in the first quarter jump 17.4% and it was equally as strong in North America as internationally. This Zacks #1 Rank (strong buy) is still attractively valued at 14.7x forward estimates. Read the full article.

Big Oil is back in the spotlight. Exxon Mobil Corporation (XOM) saw first quarter profit jump 69% on high crude prices and a record quarter for its chemical division. Yet this Zacks #1 Rank (strong buy) is still cheap with a forward P/E of just 10. Read the full article.

The good times continue to roll for the auto retailers. Lithia Motors, Inc. (LAD) blew by their own first quarter guidance as both new and used car sales saw double digit increases. This Zacks #1 Rank (strong buy) is still cheap with shares trading at just 12.3x forward estimates. Read the full article.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

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