The small-cap space offers a number of interesting companies. Is one of them the chemical company Chemours?
This time, we look at one smaller player in the small-cap space, Chemours, a chemical company that stands out not only for its products, but also for a P/E below 10 and a dividend approaching 3%.
Chemours Co $CC-3.3% is a U.S. chemical company that specializes in specialty chemical products. It was formed as a division of DuPont in 2015, but became an independent company in 2019.
Chemours focuses on manufacturing a wide range of chemical products such as fluoride products, cyanide products, titanium technology, water purification products and more.
- More information about their products can be found here.
Chemours has several competitive advantages that help it succeed in the market. For example, they have a wide range of products: Chemours produces many different chemical products, which allows it to operate in many different industries (such as automotive, energy, medical and technology, and even more in construction, agriculture and for the creation of electronics). In this way, the company diversifies its product portfolio and reduces the risk of being dependent on one or a few markets.
Technological innovation in the lead role - Chemours invests in research and development of new technologies and products, which enables it to offer innovative solutions to its customers. For example, the company has developed new types of fluorochemicals that have a lower environmental impact.
Quality and performance: Chemours focuses on the high quality of its products and is known for their excellent performance.
Global presence: Chemours has a global reach and operates manufacturing facilities in many countries around the world. This allows it to offer its products globally and be competitive in many markets.
The financial side of the company
At first glance, we can notice that the results in 2019-2020 were not entirely ideal. With the advent of the pandemic, sales decreased by 10%, which was due to reduced demand and a series of bad news.
One of the major bad news at the time was a loss of $46 million, which was due to the reduction in sales as a result of the pandemic and the loss on the sale of the Clean and Disinfect business.
Another negative event was a $335 million fine that Chemours Company had to pay in connection with a lawsuit related to perfluorooctane sulfonate (PFOS) and perfluorooctane sulfonic acid (PFOA) contamination of drinking water. These substances are part of so-called perfluorinated alkylating substances (PFAS), which are used, for example, in the manufacture of coatings for cookware, textiles and the like. However, these chemicals have proven to be potentially harmful to health and the environment.
Another event that affected Chemours Company's performance was the change in its business relationship with DuPont. Chemours Company separated from DuPont in 2015 and agreed to terms under which it could continue to purchase the necessary raw materials and sell its products to DuPont. However, in 2019, the relationship between the two companies deteriorated and Chemours Company found itself in a difficult situation, unable to find alternative suppliers of raw materials at competitive prices.
🚨 Therefore, in 2019-2021, Chemours Company took several steps to deal with the supply chain problem and secure the necessary raw materials at competitive prices, which it also succeeded in doing. At the same time, we also see this in the stronger sales over the last two years.
In 2020, Chemours Company announced that it had entered into a supply agreement with Solvay of Belgium, one of the largest fluoride producers in the world. This agreement allows Chemours Company to purchase up to 4,000 tonnes of hydrofluoric acid per year from Solvay, a key raw material for the production of some of the Company's products.
However, as of 2021, Chemours has returned to profitability and expects to ride the growth wave again.
A look at revenue 👇
- Chemours' annual revenue for 2022 was $6.794 billion, up 7.08% from 2021.
- Chemours' annual revenue for 2021 was $6.345 billion, an increase of 27.69% from 2020.
- Chemours' annual revenue for 2020 was $4.969 billion, a decrease of 10.08% from 2019.
Net profit 👇
- Chemours' annual net profit for 2022 was $0.578 billion, down 4.93% from 2021.
- Chemours' annual net profit for 2021 was $0.608 billion, an increase of 177.63% from 2020.
- Chemours' annual net profit for 2020 was $0.219 billion, a decrease of 521.15% from 2019.
- Chemours' total assets for 2022 were $7.64 billion, an increase of 1.19% from 2021.
- Chemours' total assets for 2021 were $7.55 billion, an increase of 6.61% from 2020.
- Chemours's total assets for 2020 were $7.082 billion, a decrease of 2.42% from 2019.
- Chemours' total liabilities for 2022 were $6.533 billion, an increase of 1% from 2021.
- Chemours' total liabilities for 2021 were $6.468 billion, an increase of 3.21% from 2020.
- Chemours' total liabilities for 2020 were $6.267 billion, a decrease of 4.51% from 2019.
Long-term debt 👇
- Chemours' long-term debt for 2022 was $3.59 billion, a decrease of 3.6% from 2021.
- Chemours' long-term debt for 2021 was $3.724 billion, a decrease of 7.02% from 2020.
- Chemours' long-term debt for 2020 was $4.005 billion, a decrease of 0.52% from 2019.
- Chemours' cash for 2022 was $1.102 billion, a decrease of 24.05% from 2021.
- Chemours cash on hand for 2021 was $1.451 billion, an increase of 31.31% from 2020.
- Chemours cash on hand for 2020 was $1.105 billion, an increase of 17.18% from 2019.
A look at margins over time 👇
- When we compare the fundamentals to the sector average, we find that the P/E and P/S are below the sector average, while the P/B is several times higher, which may indicate a stock's outperformance.
- As such, debt is not ideal, but it is gradually being reduced.
- What is fascinating here though is the ROE, which is at 48.50%, well above the sector average.
- Besides, the company pays a dividend of 2.85%.
Calculating the intrinsic value of the stock according to Alphaspread 👇
Analysts see it as follows 👇
The 12 analysts offering 12-month price forecasts for Chemours Co have a median target of 37.00, with a high estimate of 52.00 and a low estimate of 27.00. The median estimate represents an increase of +5.47% from the last price of 35.08.
The company is definitely operating in an interesting sector, however the results and especially the debt levels still keep me grounded. Moreover, the company expects some slowdown in 2023 on lower sales of TiO2 (titanium dioxide) products, so the price may still be weighed down by weakened sales. However, if I am convinced their financial situation is improving as the year progresses, I will give the company more leeway and do a more detailed analysis. Of course, I follow analysts' estimates, so I'm buying now, but I'm not doing that.
Please note that this is not financial advice. Every investment must go through a thorough analysis.