This is a continuation of my write up of specialty chemical companies that seem to be good investments, including a couple of businesses that produce additives to petroleum or gasoline products (see also: “Specialty Chemical Companies for You to Buy“). These are all in the mid-capitalization range, between $1 billion and $10 billion. A bit of research should help decide where the best investments are.
Divestiture of division should assist profit trends
The first company on my list is OM Group, Inc. (NYSE:OMG). It is a diversified manufacturer operating through three divisions:
1. Magnetic technologies contributed 39% of 2012 revenue
2. Specialty chemicals 25%
3. Battery technologies 9%
The remaining 27% of sales were derived from the advanced materials segment, that was subsequently divested on March 29.
That division sale, along with the sale of its ultra-pure chemicals business within specialty chemicals, ought to support much-improved margins and better year-over-year profit comparisons.
Remaining businesses will focus on organic growth and synergistic acquisition activities. In fact, OM Group, Inc. (NYSE:OMG) has a strong balance sheet that should provide funding for such purposes, marked by a low long-term debt-to-equity ratio of 8%.
OM Group, Inc. (NYSE:OMG)’s shares are up an impressive 39% this year as of this write-up. Shares are trading at a P/E of 18.4 on a forward basis. More upside may be in the cards as the benefits of its profit enhancing measures are realized.
Methanol producer on a roll
Total sales volumes of methanol rose about 10% in the June quarter, and should continue to trend upward. Along with higher demand and pricing in North America and Europe, China is gaining ground as an international market. As a result, share earnings are apt to approximately double this year if conditions hold.
Methanex Corporation (USA) (NASDAQ:MEOH) shares are trading at a forward P/E ratio of 11.0, but the stock is primarily a growth investment at this juncture. The company is investing in facilities where, geographically, it sees opportunities for several years hence.
Petroleum additives maker performing well
Finally, NewMarket Corporation (NYSE:NEU), similar to the previous company, produces petroleum additives. Its four subsidiaries are involved with that operation in some form or another, including a real estate development business that owns its own facility.