A Board Member Bought Shares of Kronos Worldwide

There is a wide variety of publicly traded specialty chemicals companies; we’d pick out Huntsman Corporation (NYSE:HUN), Cabot Corp (NYSE:CBT), HB Fuller Co (NYSE:FUL), and PolyOne Corporation (NYSE:POL) as an appropriate peer group. Kronos’s 2013 P/E of 15, which seemed reasonable in absolute terms, turns out to be a bit pricier than most of these companies. PolyOne is an exception at 17 times expected earnings, though that company reported an 11% rise in net income in its most recent quarterly report versus a year earlier. HB Fuller has earnings multiples in the teens as well.

Huntsman and Cabot are somewhat more conventional value stocks at least in terms of pricing. Trailing and forward P/E multiples are less than 10 in each case, with PEG ratios of 1 or lower. Now, these stocks are highly correlated with market indices with betas of about 2, and their recent financial performance has not been particularly strong (very weak revenue growth at Cabot, and a moderate decline in sales at Huntsman) but they seem to be less complicated cases than Kronos and possibly better places to start looking for value.

Of course, Kronos could outperform analyst expectations and the insider purchase suggests that Simmons expects it to, but we doubt that it’s wise to depend on that particularly with such a strong outcry on the short side. Huntsman and Cabot are at least worth considering in our view although we would want to see some signs that their businesses are stabilizing. Growth isn’t necessary in those cases but continued decline might leave them overvalued even at their currently low multiples.