The chemical industry is well-positioned for long-term growth thanks to the high demand for specialty chemicals and the integration of digital technology. So, quality chemical stocks Toray Industries, Inc. (TRYIY), Mitsubishi Chemical Group Corporation (MTLHY), and ChromaDex Corporation (CDXC) could be worth buying.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the chemical industry.
The American Chemistry Council (ACC) U.S. Chemical Production Regional Index (U.S. CPRI) increased by 0.4% in February, following a 0.1% drop in January. Compared to February of the previous year, output increased by 2.0%, with year-over-year growth across all regions (excluding the Northeast).
The global chemicals market is expected to be worth $982.20 billion by 2030, registering a CAGR of 4.8%. The rising demand for inorganic chemicals in the fertilizer industry is expected to propel the chemicals market forward, as these chemicals improve plant growth and productivity.
The agrochemical industry's demand for specialized performance chemicals has increased significantly in recent years. They have a wide range of applications in sectors such as manufacturing, cosmetics, construction, electronics, and mining. The specialty chemicals market is estimated to total $762.08 billion by 2030, expanding at a CAGR of 4.4%.
In light of these encouraging trends, let’s examine the fundamentals of the three Chemicals stocks, beginning with the third pick.
Stock #3: Toray Industries, Inc. (TRYIY)
Headquartered in Tokyo, Japan, TRYIY, together with its subsidiaries, manufactures, processes, and sells fibers and textiles, performance chemicals, carbon fiber composite materials, environment and engineering products, and life science products in Japan, China, North America, Europe, and internationally.
TRYIY’s forward EV/Sales of 0.79x is 51.5% lower than the industry average of 1.63x. Its forward Price/Sales multiple of 0.46 is 63.4% lower than the industry average of 1.27.
TRYIY’s trailing-12-month asset turnover ratio of 0.73x is 5.5% higher than the 0.69x industry average.
For the nine months ended December 31, 2023, TRYIY’s revenues stood at ¥1.83 trillion ($12.09 billion), while its operating income came in at ¥71.37 billion ($471.68 million). Its profit and EPS came in at ¥45.66 billion ($301.76 million) and ¥28.46, respectively.
Also, its total assets came in at ¥3.39 trillion ($22.39 billion) for the period that ended December 31, 2023, compared to ¥3.19 trillion ($21.11 billion) for the period that ended March 31, 2023.
For the quarter ending June 30, 2024, TRYIY’s revenue is expected to increase marginally year-over-year to $4.07 billion. Over the past month, the stock has gained 5.8% to close the last trading session at $9.71.
TRYIY’s POWR Ratings reflect this promising outlook. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TRYIY has an A grade for Stability and a B for Growth, Value, and Momentum. Within the B-rated Chemicals industry, it is ranked #3 out of 82 stocks. To see the additional ratings of TRYIY for Sentiment and Quality, click here.
Stock #2: Mitsubishi Chemical Group Corporation (MTLHY)
Headquartered in Tokyo, Japan, MTLHY offers performance products, chemicals, industrial gasses, health care products, and other products internationally. It provides polyester films for various applications, industrial and packaging materials for food and other products. It also offers high-performance engineering plastics.
MTLHY’s forward EV/EBITDA of 6.79x is 19.4% lower than the industry average of 8.43x. Its forward Price/Sales multiple of 0.30 is 76.1% lower than the industry average of 1.27.
MTLHY’s trailing-12-month levered FCF margin of 6.40% is 22.7% higher than the 5.21% industry average. Its trailing-12-month Return on Common Equity of 11.44% is 77.2% higher than the 6.46% industry average. Additionally, its 6.99% trailing-12-month Return on Total Capital is 38.4% higher than the 5.06% industry average.
For the nine months that ended December 31, 2023, MTLHY reported a sales revenue of ¥3.24 trillion ($21.84 billion). The company’s gross profit increased marginally year-over-year to ¥856.04 billion ($5.76 billion). Its operating income grew 337% from the year-ago value to ¥212.50 billion ($1.43 billion).
In addition, the company’s net income and EPS came in at ¥144.27 billion ($971.18 million) and ¥69.88, up 222.0% and 505.0% from the prior-year period, respectively.
Street expects MTLHY’s revenue for the year ending March 31, 2024, to increase significantly year-over-year to $28.97 billion. Over the past month, the stock has gained 10.1% to close the last trading session at $30.90.
MTLHY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #2 in the same industry. It has an A grade for Value and Stability and a B for Growth and Quality. Click here to see the additional ratings of MTLHY for Momentum and Sentiment.
Stock #1: ChromaDex Corporation (CDXC)
CDXC operates as a bioscience company that focuses on developing healthy aging products. It has three segments: Consumer Products; Ingredients; and Analytical Reference Standards and Services. The company researches nicotinamide adenine dinucleotide (NAD+) and provides finished dietary supplement products.
CDXC’s forward EV/Sales of 2.74x is 25.3% lower than the industry average of 3.66x. Its forward Price/Sales multiple of 2.99 is 22.2% lower than the industry average of 3.83.
CDXC’s trailing-12-month gross profit margin of 60.76% is 6.7% higher than the industry average of 56.93%. Its 11.33% trailing-12-month levered FCF margin is significantly higher than the 0.78% industry average. Its 1.53x trailing-12-month asset turnover ratio is 291.2% higher than the 0.39x industry average.
During the fourth quarter that ended December 31, 2023, CDXC’s sales increased marginally year-over-year to $21.20 million. The company’s gross profit rose 7.7% from the year-ago value to $12.94 million. Its adjusted EBITDA came in at $1.25 million, an increase of 256.3% year-over-year.
Also, the company’s cash and cash equivalents were $27.33 million as of December 31, 2023, compared to $20.44 million as of December 31, 2022.
Analysts expect CDXC’s EPS for the year ending December 31, 2025, to increase significantly year-over-year to $0.06. Its revenue is expected to grow 17.7% year-over-year to $114.28 million for the same period. CDXC shares have gained 168.5% over the past six months, closing the last trading session at $3.84.
It’s no surprise that CDXC has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has an A grade for Quality and a B for Growth and Sentiment. It is ranked first in the Chemicals industry.
Beyond what is stated above, we’ve also rated CDXC for Value, Momentum, and Stability. Get all CDXC ratings here.
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MTLHY shares were trading at $30.90 per share on Wednesday afternoon, up $0.17 (+0.54%). Year-to-date, MTLHY has gained 2.76%, versus a 9.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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