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Here's Why You Should Add Koppers (KOP) to Your Portfolio

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Koppers Holdings Inc.’s (KOP - Free Report) shares have popped around 19% over the past three months. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

Koppers has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.

Let’s take a look into the factors that make this global provider of wood treatment chemicals, treated wood products and carbon compounds an intriguing choice for investors right now.

Price Performance

Shares of Koppers have rallied 56.2% over the past six months against the 29.2% rise of its industry. It has also outperformed the S&P 500’s 20.6% rise over the same period.

 

 

Estimates Going Up

Over the past month, the Zacks Consensus Estimate for Koppers for the current year has increased around 12.3%. The consensus estimate for 2021 has also been revised 11.5% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Healthy Growth Prospects

The Zacks Consensus Estimate for current-year earnings for Koppers is currently pegged at $3.84, reflecting an expected year-over-year growth of 16%. Moreover, earnings are expected to register a 11.3% growth in 2021.

Superior Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Koppers is 42.1%, above the industry’s level of 9%.

Valuation Looks Attractive

Koppers’ shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.

Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Koppers is currently trading at trailing 12-month EV/EBITDA multiple of 7.04, cheaper compared with the industry average of 9.61.

Upbeat Prospects

Koppers, in third-quarter 2020, benefited from sustained demand for copper-based preservatives in the United States and pent-up demand in international markets. It also saw improved demand for utility poles in Australia and crosstie disposal services in the United States in the quarter.

The company also raised its earnings outlook for 2020. It now sees adjusted earnings per share for 2020 in the band of $3.65-$3.90, up from its prior expectation of $3.25-$3.50. The company also increased its adjusted EBITDA guidance to the band of $204-$210 million for the year from its earlier view of $196-$204 million.

Koppers is witnessing strong demand for residential wood treatment preservatives in most geographic regions. The company also plans to cut debt by around $125 million in 2020 leveraging strong cash flows and improved working capital management.

 

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Bunge Limited (BG - Free Report) , Impala Platinum Holdings Limited (IMPUY - Free Report) and BHP Group (BHP - Free Report) .

Bunge has an expected earnings growth rate of 43% for the current year. The company’s shares have gained around 18% in the past year. It currently carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of 131.7% for the current fiscal. The company’s shares have rallied around 26% in the past year. It currently carries a Zacks Rank #2.

BHP Group has a projected earnings growth rate of 32.4% for the current fiscal year. The company’s shares have gained around 17% in a year. It currently carries a Zacks Rank #2.

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