Olin Corporation (OLN) manufactures and distributes chemical products in the United States, Europe, and worldwide. It operates in three segments: Chlor Alkali Products and Vinyls; Epoxy; and Winchester. The stock has gained 17.2% over the past year and 19.6% over the past month to close its last trading session at $56.43.
OLN’s Board of Directors recently approved a new $2 billion share repurchase program. The company stated that its share repurchase program reflects its Board of Directors' confidence in OLN’s future earnings and cash flow generation.
Scott Sutton, Chairman, President, and CEO of OLN, said, "During the first half of 2022, we repurchased approximately 8% of shares outstanding for $689.7 million from cash flow while maintaining our net debt levels.”
The company delivered EPS of $2.76 for the second quarter of 2022, beating the Street estimate by 7.4%.
Here is what could shape OLN’s performance in the near term:
Latest Developments
In April, OLN and Plug Power Inc. (PLUG), one of the largest providers of turnkey hydrogen solutions for the global green hydrogen economy, announced the signing of a memorandum of understanding (MOU) with an aim to create a joint venture to produce and market green hydrogen to support growing fuel cell demand in the global hydrogen economy.
Robust Financials
OLN’s sales increased 17.8% year-over-year to $2.62 billion for the second quarter. Its operating income grew 43.1% from its year-ago value to $565.40 million, while its net income came in at $422.10 million, up 18.6% from the prior-year quarter. The company’s EPS rose 27.2% year-over-year to $2.76.
Strong Profitability
OLN’s trailing-12-month net income margin of 15.36% is 72% higher than the industry average of 8.93%. In addition, its trailing-12-month EBITDA margin of 28.76% is 21% higher than the 37.26% industry average. Also, its trailing-12-month ROE, ROC, and ROA are 366.9%, 214.6%, and 229.7% higher than the respective industry averages.
Discounted Valuation
The company’s 5.86X forward GAAP P/E is 49.1% lower than its industry average of 11.51x. Also, its 1.09X EV/Sales is 23% lower than its industry average of 1.42x. Its 0.80x forward Price/Sales is 29.7% lower than its industry average of 1.14x.
POWR Ratings Reflect Solid Prospects
OLN has an overall B grade, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. OLN has an A grade for Quality and a B for Value. OLN’s higher-than-industry profitability is consistent with its Quality grade. Its lower valuation is in sync with its Value grade.
Among the 89 stocks in the A-rated Chemicals industry, OLN is ranked #28.
Beyond what I stated above, we have graded OLN for Growth, Stability, Sentiment, and Momentum. Get all OLN ratings here.
Bottom Line
OLN’s robust balance sheet and strong cash flow generation, evident from its share repurchase program, could raise investors' optimism about the stock. Its higher-than-industry profitability and discounted valuation make it a solid buy right now.
How does Olin Corporation (OLN) Stack Up Against its Peers?
OLN has an overall POWR Rating of B, which equates to a Buy. Check out these other stocks within the Chemical industry with A (Strong Buy) ratings: Sisecam Resources LP (SIRE), American Vanguard Corp. (AVD), and Kuraray Co., Ltd. (KURRY).
OLN shares were trading at $58.08 per share on Friday afternoon, up $1.65 (+2.92%). Year-to-date, OLN has gained 2.08%, versus a -9.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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