LyondellBasell Industries N.V.'s (LYB - Free Report) stock looks promising at the moment. The company has seen its shares pop roughly 18% 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.
Let’s delve deeper into the factors that make this chemical giant an intriguing choice for investors right now.
What’s Working in Favor of LYB?
Solid Rank & VGM Score: LyondellBasell currently 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. Thus, the company appears to be a compelling investment proposition at the moment.
An Outperformer: LyondellBasell has trounced the industry over the past six months. The company’s shares have rallied around 34.1% over this period, compared with roughly 14.8% gain recorded by the industry.
Attractive Valuation: Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, LyondellBasell is currently trading at trailing 12-month EV/EBITDA multiple of 8.2, much cheaper compared with the industry average of 20.8.
Superior Return on Equity (ROE): LyondellBasell’s ROE of 58.1%, as compared with the industry average of 11.2%, manifests the company’s efficiency in utilizing shareholder’s funds.
Growth Drivers in Place: LyondellBasell is benefiting from the favorable North American natural gas environment. It is executing its expansion projects to leverage the U.S. natural gas liquids advantage. The company’s expansion initiatives are expected to boost capacity and add to its earnings.
The company is constructing a high-density polyethylene (HDPE) plant on the U.S. Gulf Coast that will employ its proprietary Hyperzone PE technology. The facility is expected to have an annual capacity of 1.1 billion pounds.
LyondellBasell is also constructing a world scale plant on the U.S. Gulf Coast for producing propylene oxide (PO) and tertiary butyl alcohol (TBA), which will have an annual capacity of 1 billion pounds of PO and 2.2 billion pounds of TBA and its derivatives.
LyondellBasell has also commenced production at its new polypropylene (PP) compounding plant in Dalian, China. The 20 kiloton per year plant is the company's third facility in China. It is strategically located to cater the country’s growing automotive market.
Moreover, LyondellBasell, in November, entered into an agreement to buy 50% interest in Quality Circular Polymers (“QCP”) — a high standard plastics recycling company located in Sittard-Geleen, Netherlands. Per the agreement, LyondellBasell will be a 50/50 partner in QCP along with SUEZ — a French company specializing in waste and water management.
The deal combines LyondellBasell's technical capabilities and European market presence with SUEZ's ability to collect and recover waste into new materials. The new venture is likely to provide a strategic platform for sustainable growth.
Other Stocks to Consider
Other top-ranked companies in the basic materials space include Huntsman Corporation (HUN - Free Report) , Kronos Worldwide, Inc. (KRO - Free Report) and Methanex Corporation (MEOH - Free Report) , all carrying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Huntsman has an expected long-term earnings growth of 8%. The stock has gained around 74% over a year.
Kronos has an expected long-term earnings growth of 5%. The stock has gained around 124% over a year.
Methanex has an expected long-term earnings growth of 15%. Its shares are up roughly 32% over a year.
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