The stock market has faced selling pressure this year due to various macroeconomic and geopolitical concerns. The Fed has implemented six interest rate hikes to tame the high inflation this year.
While the October inflation numbers show signs of cooling down, Fed Chair Jerome Powell has cautioned that the final level of interest rates will be higher than expected. Therefore, many economists expect the economy to slip into a recession next year, leading to more pain for the stock market.
Amid uncertain economic conditions, investors looking for a steady income stream and long-term capital appreciation could consider buying Sisecam Resources LP (SIRE), as the company pays reliable dividends and possesses solid growth prospects.
SIRE produces natural soda ash with its facility in the Green River basin of Wyoming. It is engaged in mining trona ore to produce soda ash. It processes trona ore into soda ash, an essential raw material in flat glass, container glass, detergents, chemicals, paper, and other consumer and industrial products.
In the third quarter, the trona ore mining company saw higher sales on the back of price increases. Higher demand in the domestic and international markets drove sales prices higher.
SIRE pays a $2.15 per share dividend annually, which translates to a 9.24% yield on the current share price. Its four-year dividend yield is 7.16%. The company’s dividend payouts have grown at a CAGR of 10.6% over the past three years.
SIRE has gained 31.2% in price year-to-date and 18.4% over the past year to close the last trading session at $21.65.
Here’s what could influence SIRE’s performance in the upcoming months:
Robust Financials
SIRE’s net sales increased 40.5% year-over-year to $190.50 million for the third quarter ended September 30, 2022. The company’s operating income increased 295.2% year-over-year to $32.80 million. Its net income attributable to SIRE rose 108.1% year-over-year to $15.40 million. In addition, its adjusted EBITDA attributable to SIRE increased 69.2% year-over-year to $20.30 million.
Discounted Valuation
In terms of trailing-12-month GAAP P/E, SIRE's 7.51x is 36.4% lower than the 11.81x industry average. Its trailing-12-month P/S of 0.63x is 44% lower than the 1.12x industry average. Also, the stock's 5.95x trailing-12-month EV/EBIT is 41.6% lower than the 10.18x industry average.
High Profitability
In terms of the trailing-12-month EBIT margin, SIRE’s 17.58% is 28.8% higher than the 13.65% industry average. Likewise, its 21.63% trailing-12-month EBITDA margin is 5.6% higher than the industry average of 20.47%. Furthermore, the stock’s 6.48% trailing-12-month levered FCF margin is 22.8% higher than the industry average of 5.28%.
POWR Ratings Show Promise
SIRE has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
SIRE has a B grade for Value, in sync with its discounted valuation. It has an A grade for Quality, consistent with its high profitability.
Its 0.71 beta justifies its B grade for Stability.
SIRE is ranked first out of 87 stocks in the B-rated Chemicals industry. Click here to access SIRE’s ratings for Growth, Momentum, and Sentiment.
Bottom Line
SIRE is trading above its 50-day and 200-day moving averages of $21.60 and $20.16, respectively, indicating an uptrend. SIRE reported impressive earnings in the last quarter due to high prices and strong demand for soda ash. The company’s financial discipline positions it to pay increasing dividends to its shareholders.
Given its robust financials, discounted valuation, and high profitability, investing in this dividend-paying stock could be wise amid the current uncertain economic conditions.
How Does Sisecam Resources LP (SIRE) Stack up Against Its Peers?
SIRE has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Chemicals industry with an A (Strong Buy) rating: American Vanguard Corporation (AVD), Kuraray Co., Ltd. (KURRY), and AdvanSix Inc. (ASIX).
SIRE shares were trading at $21.44 per share on Monday afternoon, down $0.21 (-0.97%). Year-to-date, SIRE has gained 43.69%, versus a -16.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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