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Here's Why You Should Add Cabot (CBT) Stock to Your Portfolio

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Cabot Corporation’s (CBT - Free Report) stock looks promising at the moment. The company’s shares have popped around 15% 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.

Cabot currently carries 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 specialty chemicals and performance materials company an attractive choice for investors right now.

What Makes CBT an Attractive Pick?

An Outperformer

Shares of Cabot are up 26.6% over the past six months against the 18.9% rise of its industry. It has also outperformed the S&P 500’s roughly 11.5% rise over the same period.

 

 

 

Estimates Moving Up

Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for Cabot for the current fiscal year has increased around 19.5%. The consensus estimate for the next fiscal has also been revised 7.9% upward over the same time frame.

Healthy Growth Prospects

The Zacks Consensus Estimate for earnings for the current fiscal for Cabot is currently pegged at $3.80, reflecting an expected year-over-year growth of 82.7%. Moreover, earnings are expected to register an 8.2% growth in the next fiscal year.

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 Cabot is 15%, above the industry’s level of 9.4%.

Attractive Valuation

Valuation looks attractive as Cabot’s 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, Cabot is currently trading at trailing 12-month EV/EBITDA multiple of 6.43, cheaper compared with the industry average of 13.01.

Strong Q1 & Upbeat Prospects

Cabot saw higher profits in the first quarter of fiscal 2021. Adjusted earnings per share for the quarter were $1.18, up from 69 cents in the year-ago quarter. The figure also trounced the Zacks Consensus Estimate of 87 cents. Net sales went up around 3% year over year to $746 million in the quarter and also surpassed the Zacks Consensus Estimate of $691.6 million.

Cabot saw strength in volumes and strong unit margins in the Reinforcement Materials segment. Its Performance Chemicals unit also benefited from increased volumes and improved product mix in specialty carbons and compounds product lines, courtesy of higher sales in automotive applications.

The company expects near-term conditions to remain favorable. It forecasts strength in demand in the fiscal second quarter. The company also sees Reinforcement Materials volumes to remain strong in the second quarter. It also completed the negotiation of its Reinforcement Materials customer agreements for 2021 in the fiscal first quarter.

Cabot should gain from a recovery in demand from its automotive and tire customers from the pandemic-led slowdown, its disciplined execution of operations and targeted growth initiatives. The company saw strong volumes in the tire and automotive markets in the first quarter on the back of continued global recovery.

The company should also benefit from the acquisition of Shenzhen Sanshun Nano New Materials. The acquisition significantly bolsters the market position and formulation capabilities of Cabot in the high-growth batteries market, especially in China. The buyout is also expected to create opportunities to expand Cabot’s position in the rapidly growing energy storage market.

 

Cabot Corporation Price and Consensus

 

Cabot Corporation Price and Consensus

Cabot Corporation price-consensus-chart | Cabot Corporation Quote

 

Stocks to Consider

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

Fortescue has a projected earnings growth rate of 95.4% for the current fiscal. The company’s shares have surged around 175% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BHP Group has a projected earnings growth rate of 69.3% for the current fiscal year. The company’s shares have shot up around 82% in a year. It currently carries a Zacks Rank #1.

Impala Platinum has an expected earnings growth rate of 187% for the current fiscal. The company’s shares have rallied around 98% in the past year. It currently carries a Zacks Rank #2.

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