3 Seemingly Undervalued Basic Materials Companies

Brittney Barrett |

The past several weeks have been rough for the markets, making risky investments look unappealing. Below, we identified three sturdy stocks in basic materials that have budged little in the recent market tumult. These stocks are riding below their 52-week highs, but with low P/E ratios, high market caps, strong annual performance and a solid plan for the coming year.

PPG Industries, Inc. (PPG)

PPG Industries is a producer and supplier of decorative coatings, optical and specialty materials, commodity chemicals, and glass. An international company, with operations in Europe the Middle East and Africa, their products are employed in anything from marine, aircraft equipment and auto equipment to optical products.   Their access to a range of markets gives them relative stability base while their strategy of acquisition could help buoy prices further. On May 5, they bough Denmark-based coatings company Dyrup A/S for a sum of $200 million in an effort to expand growth in several key countries, including Poland, France and Denmark, while further establishing PPG in several regions where they have limited or no architectural coatings presence, especially in Portugal, Spain and Germany. The company has aggressively reduced costs during the past fiscal year in an effort to increase margins and negate the pitfalls of rising commodities prices. So far it has worked. In April, PPG reported first-quarter profits well beyond those of the year prior as well as higher volume and prices. The company is trading considerable below its 52-week high, like many companies right now, making this an opportunity to buy on a slight dip. It has a P/E ratio of 14.5 x, revenue of $13.8B and a return on equity of 26.8 percent. Dividends are 2.71 percent of $2.28.

International Paper Company (IP)

(International Paper, the global paper and packaging company, has operations ranging from North America to Europe, Latin America, Russia, Asia and North Africa. The company has a proven history of successful Mergers & Acquisitions, which have contributed to reducing costs and increasing yields. International Paper indicated their intentions to continue this tradition, making an unsolicited offer on Temple-Inland this  past week. The company rejected the deal on the basis that IP’s hostile-take over bid undervalued the company, despite being well over recent closing prices.   In 2008, International Paper paid $6 billion to acquire Weyerhaeuser another paper company, adding scale, increasing company cash flows and saving $100 million. As of 2006, the company began restructuring by exiting noncore businesses totaling $11 billion, while reducing costs to enhance cash flows and margins while minimizing the debt load.  The current yield is 3.29 percent or $1.64 a share. The P/E ratio is 14.1 with revenue of 33.9B for the trailing 12 months. Marker Cap for International Paper is 46.8 billion.

DuPont (DD)

E. I. du Pont de Nemours and Company (DuPont) is a supplier of a range of products and services for markets, including agriculture and food, building and construction, electronics and communications, general industrial and transportation.DuPont’s service of the agriculture industry could help shares of the stock continue to improve in current months. The stock has proven its strength; standing solidly against the otherwise tumbling market. On Thursday, DuPont led stocks higher, indicating continued investor interest and the potential for shares to make significant gains should the market regain some of the strength exhibited last month. Additionally, the stock looks relatively cheap by the numbers, with an 11.5x P/E ratio and a market cap of 12.8B. Dividents are around 3.71 percent or $1.05 per share.

 

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Companies

Symbol Name Price Change % Volume
LEG Leggett & Platt Incorporated 48.32 0.00 0.00 100

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