We are positive on Ingevity Corporation’s (NGVT - Free Report) prospects and believe that the time is right for you to buy the stock as it looks promising and is poised to continue the momentum.
Let’s delve deeper into the factors that make this Zacks Rank #2 (Buy) stock an attractive investment option.
What Makes NGVT an Attractive Pick
An Outperformer: Ingevity has outperformed the industry it belongs to over the past six months. The company’s shares have gained 16% compared with roughly 1% growth recorded by the industry.
Superior Return on Equity (ROE): Ingevity’s ROE of 48.1% compared with the industry average of 15.8%, reflects the company’s efficiency in utilizing shareholder’s funds.
Strong Earnings Growth Prospects & Impressive Surprise History: Ingevity has an expected long-term earnings growth rate of 12%, higher than the industry average of 10.9%.
The company has also topped the Zacks Consensus Estimate for earnings in each of the trailing four quarters with an average positive surprise of 20.2%.
Upbeat Outlook: In first-quarter 2018, Ingevity narrowed and increased the mid-point for full-year 2018 guidance for sales and adjusted EBITDA.
It now expects sales for the year in the range of $1.10-$1.13 billion compared with prior view of $1.07-$1.13 billion. Adjusted EBITDA is expected to be between $293 million and $307 million compared with prior view of $285-$305 million.
Acquisitions & TOFA-based Products to Drive Results: Ingevity is expected to gain from its strategy to pursue value-creating acquisitions. Earlier this year, the company closed the buyout of Georgia-Pacific’s pine chemicals business for $310 million. During first-quarter 2018, the acquisition contributed roughly $5 million in sales of Performance Chemicals division and $2 million in the segment EBITDA. The buyout is expected to create net synergies of roughly $11 million through manufacturing optimization, lower logistics costs and leveraged procurement costs.
Moreover, higher adoption of TOFA-based products is driving results for the company’s Performance Chemicals division. Also, a recovery in TOFA prices had considerable positive impact on the overall margins of the division in the last reported quarter. The company expects its high margin application areas to continue strengthening, going forward.
Other Stocks to Consider
Some other top-ranked stocks worth considering in the basic materials space are FMC Corporation (FMC - Free Report) , Westlake Chemical Corporation (WLK - Free Report) and Celanese Corporation (CE - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
FMC Corp has an expected long-term earnings growth rate of 14.3%. Its shares have moved up 18.6% in a year.
Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied 79.8% in a year.
Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have gained 28.4% in a year.
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