Back to top

Image: Bigstock

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

Read MoreHide Full Article

Koppers Holdings Inc.’s (KOP - Free Report) shares are up around 19% year to date. 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 B. 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 33% over the past year against the 2.5% rise of its industry. It has also outperformed the S&P 500’s 15.7% rise over the same period.


Zacks Investment Research
Image Source: Zacks Investment Research


Positive Earnings Surprise History

Koppers has outpaced the Zacks Consensus Estimate in three of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 13.6%, on average.

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 23.3%, above the industry’s level of 15.6%.

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 6.74, cheaper compared with the industry average of 8.48.

Strong Utility Demand, Pricing Actions to Aid Results

Koppers remains focused on driving improvements through the execution of its strategic initiatives and making progress toward its long-term financial goals. It remains committed to expand its business with new products and markets. The company should also benefit from its network optimization program.

The company is also gaining from actions to raise prices to counter higher raw material, transportation and labor costs. Its Railroad and Utility Products and Services (RUPS) and Performance Chemicals units delivered record first-quarter sales on the back of price increases. It is also seeing strong demand from the U.S. utility market, which is driving profitability in the RUPS segment. Moreover, KOP remains committed to delivering strong cash flows and reducing debt.



Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include L.B. Foster Company (FSTR - Free Report) , Gold Fields Limited (GFI - Free Report) , and Linde plc (LIN - Free Report) .

L.B. Foster currently carries a Zacks Rank #1. The Zacks Consensus Estimate for FSTR's current-year earnings has been stable over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

L.B. Foster’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 140.5%, on average. FSTR has gained around 10% in a year.

Gold Fields currently carries a Zacks Rank #2. The Zacks Consensus Estimate for GFI’s current-year earnings has been revised 4% upward in the past 60 days.

The consensus estimate for current-year earnings for GFI is currently pegged at $1.05, reflecting an expected year-over-year growth of 8.3%. Gold Fields’ shares have popped roughly 58% in the past year.

Linde currently carries a Zacks Rank #2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 4.4% upward in the past 60 days.

Linde beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 6.9% on average. LIN’s shares have gained roughly 24% in the past year.

Published in