Methanex Corporation’s (MEOH - Free Report) stock looks promising at the moment. The company has seen its shares rally around 26% over the past three months. The stock is also up around 18% year to date.
The stock has been performing well lately on the back of healthy methanol demand and pricing fundamentals. 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 is poised to carry the momentum ahead.
Let’s delve deeper into the factors that make this chemical maker an intriguing choice for investors right now.
What’s Working in Favor of MEOH?
Solid Rank & VGM Score: Methanex currently has a Zacks Rank #1 (Strong 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 or #2 (Buy), offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.
An Outperformer: Methanex has trounced the industry over a year. The company’s shares have shot up around 74.1% over this period, compared with roughly 11.8% growth recorded by the industry.
Strong Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for Methanex is currently pegged at $6.16, reflecting an expected year-over-year growth of 30.8%. The company also has an expected long-term earnings per share growth of 15%, higher than the industry average of 10.2%.
Superior Return on Equity (ROE): Methanex’s ROE of 24.5%, as compared with the industry average of 9.2%, manifests the company’s efficiency in utilizing shareholder’s funds.
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, Methanex is currently trading at trailing 12-month EV/EBITDA multiple of 9, cheaper compared with the industry average of 12.9. This signals more upside for the stock.
Upbeat Prospects: Methanex is poised to gain from healthy demand fundamentals for methanol. Demand has been driven by both traditional derivatives and energy-related applications in Asia, particularly in China. Per the company, global demand for methanol increased 4% year over year in the first quarter and is expected to remain healthy in 2018.
Moreover, higher methanol prices are boosting the company’s revenues and margins. In the first quarter, the company’s average realized prices for methanol went up roughly 10% year over year, while the same rose 15% sequentially.
The company’s profits rose around 28% year over year in the first quarter. Revenues also increased roughly 18.8% year over year to $962 million in the quarter on the back of higher prices.
Moreover, Methanex remains on track with its plans of capitalizing on near-term growth opportunities in Chile. Methanex’s Chile IV plant is also progressing with its restart process and is expected to be complete by third-quarter 2018.
With a committed revolving credit facility, strong balance sheet and healthy cash-generation capability, the company believes that it is well positioned to meet its financial commitments, execute growth opportunities and return excess cash to shareholders through dividends and share repurchases.
Other Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Westlake Chemical Corporation (WLK - Free Report) , The Chemours Company (CC - Free Report) and Celanese Corporation (CE - Free Report) , each carrying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 74% over a year.
Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have gained around 22% in a year.
Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have rallied roughly 28% over a year.
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